Top 3 ASX stocks valued below market value in July 2024

Amid a generally positive trend in the Australian market, with the ASX200 closing in positive territory and most sectors posting gains, investors are closely monitoring shifts in various sectors influenced by global economic signals and local corporate developments. In this context, it is crucial to identify stocks that appear undervalued as they may offer growth potential, especially if they are in line with broader economic movements and sector-specific trends.

The 10 most undervalued stocks in Australia based on cash flows

Click here to see the full list of 49 stocks from our Undervalued ASX Stocks Based on Cash Flows screener.

Here’s a quick look at some of the choices from the screener.

Overview: James Hardie Industries plc specializes in the manufacture and sale of fiber cement, fiber gypsum and cementitious building products for various construction applications in the United States, Australia, Europe, New Zealand and the Philippines and has a market capitalization of A$21.15 billion.

Operations: The company’s revenue is generated in three main segments: Building Products in Europe at $482.10 million, Fiber Cement in Asia Pacific at $562.80 million and Fiber Cement in North America at $2.89 billion.

Estimated discount to fair value: 27.5%

James Hardie Industries trades at A$49.03 and appears undervalued based on cash flows with an estimated fair value of A$67.58. Current financials show a stable net profit with expected modest earnings growth (13.97% per annum) that exceeds the Australian market forecast (12.8% per annum). Despite high debt, the company has an aggressive buyback strategy, recently increased its authorization by A$50 million and has been included in the S&P/ASX 20 Index, indicating robust market confidence and operational strength.

Overview: Lotus Resources Limited is a company focused on the exploration, evaluation and development of uranium deposits in Australia and Africa and has a market capitalization of approximately A$668.59 million.

Operations: The Company derives its revenue primarily from its uranium exploration and development activities in Australia and Africa.

Estimated discount to fair value: 34.5%

Lotus Resources is considered to be undervalued at A$0.37 compared to an estimated fair value of A$0.56 based on discounted cash flows, which is a significant undervaluation. Although the company generated less than A$1 million in revenue last year and recently experienced share dilution, it is expected to become profitable within three years, with robust annual earnings growth and an exceptionally high return on equity of 69.3% expected. Analysts’ consensus estimate is for a potential price increase of 78.9%.

Overview: Regal Partners Limited, a privately held hedge fund sponsor, has a market capitalization of approximately A$1.10 billion.

Operations: The company generates total revenues of AUD 105.28 million, primarily from the provision of investment management services.

Estimated discount to fair value: 42.3%

Currently valued at A$3.48, Regal Partners appears to be undervalued compared to its estimated fair value of A$6.03, suggesting a potential opportunity based on discounted cash flow analysis. The company has seen revenues grow 19.2% over the past year and expects continued robust growth, with revenue and earnings expected to grow 21.2% and 32.3% per year respectively, comfortably outperforming Australian market forecasts. However, challenges include lower year-on-year profit margins and significant recent insider selling, which may signal caution.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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