The materials industry is deeply cyclical with producers benefiting highly during an economic boom and many players going bankrupt in a bust. Thus, there is ample opportunity to take advantage of improving economic conditions which has led to strong demand for commodities. Indian Metals and Ferro Alloys and DCM Shriram are materials industry stocks on my list that are potentially undervalued, which means their current share prices are trading well-below what the companies are actually worth. Investors can profit from the difference by investing in these cyclical stocks as the current market prices should eventually move towards their true values. If capital gains are what you’re after in your next investment, I’ve put together a list of undervalued stocks you may be interested in, based on the latest financial data from each company.

Indian Metals and Ferro Alloys Limited (BSE:533047)

Indian Metals and Ferro Alloys Limited produces and sells ferro alloys primarily in India. Formed in 1961, and run by CEO Subhrakant Panda, the company size now stands at 1,946 people and with the stock’s market cap sitting at INR ₹13.46B, it comes under the large-cap group.

533047’s shares are now floating at around -26% lower than its intrinsic value of INR674.77, at the market price of ₹499.05, according to my discounted cash flow model. The mismatch signals a potential chance to invest in 533047 at a discounted price. Moreover, 533047’s PE ratio is trading at around 5.27x against its its Metals and Mining peer level of, 19.08x indicating that relative to its competitors, you can purchase 533047’s stock for a lower price right now. 533047 is also in good financial health, as short-term assets amply cover upcoming and long-term liabilities. The stock’s debt-to-equity ratio of 83.10% has been diminishing for the last couple of years showing its ability to pay down its debt. Dig deeper into Indian Metals and Ferro Alloys here.

DCM Shriram Limited (BSE:523367)

DCM Shriram Limited engages in chloro-vinyl, sugar, agri-input, and other businesses in India. The company was established in 1989 and with the stock’s market cap sitting at INR ₹66.14B, it comes under the large-cap stocks category.

523367’s shares are currently floating at around -29% beneath its real value of INR575.42, at the market price of ₹407.20, based on its expected future cash flows. The mismatch signals a potential chance to invest in 523367 at a discounted price. What’s even more appeal is that 523367’s PE ratio stands at 8.53x while its Chemicals peer level trades at, 21.41x indicating that relative to its competitors, you can purchase 523367’s stock for a lower price right now. 523367 is also a financially robust company, as current assets can cover liabilities in the near term and over the long run. The stock’s debt-to-equity ratio of 20.00% has been declining over time, signifying its capacity to reduce its debt obligations year on year. Continue research on DCM Shriram here.