Highly Undervalued Stocks To Profit From

Companies with shares trading at a market price below what they are actually worth, such as Big 8 Split and Loblaw Companies, are deemed undervalued. Investors can profit from the difference by investing in these 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.

Big 8 Split Inc. (TSX:BIG.D)

Big 8 Split Inc. operates as a mutual fund company in Canada. Big 8 Split was started in 2003 and with the market cap of CAD CA$19.12M, it falls under the small-cap category.

BIG.D’s stock is now floating at around -74% below its intrinsic value of $69.89, at a price of $18.5, based on my discounted cash flow model. This discrepancy gives us a chance to invest in BIG.D at a discount. What’s even more appeal is that BIG.D’s PE ratio is trading at 5.1x compared to its capital markets peer level of 12.7x, meaning that relative to its comparable company group, you can purchase BIG.D’s stock for a lower price right now. BIG.D is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 61% has been reducing over the past couple of years signalling its capacity to pay down its debt.

Loblaw Companies Limited (TSX:L)

Loblaw Companies Limited, a food and pharmacy company, provides grocery, pharmacy, health and beauty, apparel, general merchandise, retail banking, credit card, insurance, and wireless mobile products and services in Canada. Established in 1956, and now led by CEO Galen Weston, the company currently employs 195,000 people and with the market cap of CAD CA$26.46B, it falls under the large-cap group.

L’s shares are currently floating at around -30% beneath its true level of $96.93, at the market price of $68.18, based on its expected future cash flows. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, L’s PE ratio is currently around 16.2x against its its consumer retailing peer level of 22.5x, indicating that relative to its comparable company group, you can buy L for a cheaper price. L is also strong in terms of its financial health, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 89% has been reducing for the past few years showing L’s capacity to pay down its debt.

Linamar Corporation (TSX:LNR)

Linamar Corporation manufactures and sells precision metallic components, modules, and systems in Canada, United States, the Asia Pacific, Mexico, and Europe. Started in 1966, and now run by Linda Hasenfratz, the company currently employs 25,700 people and with the company’s market cap sitting at CAD CA$4.74B, it falls under the mid-cap category.

LNR’s shares are now trading at -13% under its actual value of $83.57, at the market price of $72.5, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. In addition to this, LNR’s PE ratio is trading at 8.9x relative to its auto components peer level of 22.7x, implying that relative to its comparable set of companies, you can buy LNR’s shares at a cheaper price. LNR is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 50% has been reducing over the past couple of years signifying its ability to reduce its debt obligations year on year.

For more financially sound, undervalued companies to add to your portfolio, you can use our free platform to explore our interactive list of undervalued stocks.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.