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As the FTSE 100 and FTSE 250 indices experience downward pressure due to weak trade data from China, concerns about global economic recovery continue to weigh on investor sentiment in the United Kingdom. In such a challenging market environment, identifying stocks that are trading below their intrinsic value can present opportunities for investors looking to capitalize on potential long-term growth.
Top 10 Undervalued Stocks Based On Cash Flows In The United Kingdom
| Name | Current Price | Fair Value (Est) | Discount (Est) |
| On the Beach Group (LSE:OTB) | £2.25 | £4.48 | 49.7% |
| Gaming Realms (AIM:GMR) | £0.372 | £0.67 | 44.7% |
| Legal & General Group (LSE:LGEN) | £2.437 | £4.86 | 49.8% |
| Victrex (LSE:VCT) | £9.13 | £18.15 | 49.7% |
| Gateley (Holdings) (AIM:GTLY) | £1.37 | £2.65 | 48.4% |
| AstraZeneca (LSE:AZN) | £120.18 | £220.00 | 45.4% |
| Likewise Group (AIM:LIKE) | £0.195 | £0.37 | 47.7% |
| Calnex Solutions (AIM:CLX) | £0.555 | £1.01 | 45% |
| Optima Health (AIM:OPT) | £1.83 | £3.33 | 45% |
| Melrose Industries (LSE:MRO) | £6.222 | £12.19 | 49% |
Below we spotlight a couple of our favorites from our exclusive screener.
CVS Group
Overview: CVS Group plc operates in the veterinary, pet crematoria, online pharmacy, and retail sectors with a market cap of £744.66 million.
Operations: The company generates revenue through its operations in veterinary services, pet crematoria, online pharmacy, and retail businesses.
Estimated Discount To Fair Value: 38.6%
CVS Group is trading at £10.38, significantly below its estimated fair value of £16.92, indicating it may be undervalued based on cash flows. Despite a decline in net income to £11.2 million from £14.6 million year-over-year, earnings are forecast to grow significantly at 22.8% annually over the next three years, outpacing the UK market's growth rate of 14.5%. However, profit margins have decreased and interest payments are not well covered by earnings.
Coats Group
Overview: Coats Group plc, along with its subsidiaries, manufactures and supplies industrial sewing threads globally and has a market cap of £1.41 billion.
Operations: The company's revenue segments consist of Apparel at $731 million, Footwear at $381.90 million, and Performance Materials at $327 million.
Estimated Discount To Fair Value: 40.6%
Coats Group is trading at £0.88, significantly below its estimated fair value of £1.49, suggesting it is undervalued based on cash flows. Revenue growth is projected to outpace the UK market at 5.9% annually, while earnings are expected to rise by 17.3% per year, surpassing the market's rate of 14.5%. Despite a high debt level and an unstable dividend history, analysts anticipate a price increase of 38.7%.