Top Underdog-Undervalue Stocks to Invest
Envision entering a store and finding a secret area tucked away in a corner where you find premium goods at deeply discounted costs.
You're eager already, right? Undervalued equities are the investment world's equivalent of this undiscovered gold mine. Investors look for cheap stocks that are selling below their fundamental worth, just as shrewd consumers love the chance to score a deal.
These equities are like undiscovered treasures in the financial markets, frequently passed over by the general public. However, investing in cheap stocks on the NSE might offer a chance for people who understand their actual value to profit handsomely from the market at reduced costs. We will discuss the best inexpensive Indian stocks in this article.
What is Underdogs/Undervalued Stocks?
Underperforming stocks, often known as undervalued stocks, are simply equities that are trading below their true or intrinsic value. Consequently, these might be worthwhile investment possibilities. Stated differently, it's possible that the market is undervaluing certain value stocks.
There are a number of reasons why this may happen, including transient market conditions, company-specific elements, or investor mood. Finding inexpensive stocks is not always the same as identifying undervalued shares. The secret is to avoid buying worthless stocks at extremely cheap costs and instead search for quality stocks at prices below their fair values.
Methodology for Analysis:
1. Operating Profit Margin / (Market Cap to Sales) is more than 24
2. Debt to equity less than 0.25
3. Operating Profit Margin more than 0
4. Market Cap to Sales more than 0
5. Market Capitalization more than 50Cr.
Overview of the Undervalue Stocks to Invest
|S.No.||Name||P/E||Mar Cap Rs.Cr.||Div Yld %||ROCE %||OPM %||M.Cap / Sales||Debt / Eq|
|1||Balmer Law. Inv.||7.42||966.37||7.57||12.99||10.82||0.42||0.11|
1- Balmer Lawrie Investment Ltd.
A government enterprise is Balmer Lawrie Investments Ltd. It holds a sizable investment in Balmer Lawrie & Co. Ltd. The corporation and its subsidiaries are in the business of selling leather chemicals, greases and lubricants, and industrial packaging.
Approximately 91% of revenues in FY21 came from dividend income from non-current assets, with the remaining ~9% coming from interest income from FDs on an independent basis.
The company has continued to pay out a strong 80.4% dividend.
Company has a low return on equity of 8.35% over last 3 years.
Earnings include an other income of Rs.102 Cr.
|Dividend Yield||7.59 %|
|Face Value||₹ 10.0|
|Debt to equity||0.11|
|Return on assets||6.41 %|
|Compounded Profit Growth||23%|
|Stock Price CAGR (10 Yr)||9%|
2- Ruchira Papers Ltd
Industry Softness: The company operates in the paper manufacturing industry, and the recent quarter has seen softness in paper prices, which is an industrywide phenomenon affecting many companies.
Diversification Efforts: To enhance efficiency and introduce new products, the company has invested in upgrading and modifying its Kraft and Writing Printing Paper units, showcasing a commitment to diversification and improvement.
Revenue Breakdown: Q3 FY20 total revenue amounted to Rs. 117.95 crore, with a detailed breakdown indicating challenges in both Writing and Printing Paper unit and Kraft Paper unit due to a decrease in the average Net Sales Realization (NSR) per metric ton.
Segment EBITDA Percentage: The EBITDA percentage for Writing and Printing Paper was 12.10%, while Kraft Paper faced a negative EBITDA of 4.10%, reflecting the distinct financial performance of each segment.
Production Confidence: Despite industry challenges, the company expresses confidence in achieving the production guidance for FY 2020, indicating resilience in managing production levels amid market uncertainties.
Cash Reserves: Holding surplus cash of around 25 Crore for FY20 signifies financial stability and provides flexibility for potential future investments or strategic decisions.
Market Challenges: The market is currently experiencing challenges, with no meaningful recovery in prices. Land issues with a Greenfield project persist, and the company faces difficulties in aggressive market penetration.
Demand Slowdown: The demand slowdown across India is impacting the company's ability to boost EBITDA margins, and efforts to liquidate inventory and explore new markets are ongoing.
|Dividend Yield||3.81 %|
|Face Value||₹ 10.0|
|Debt to equity||0.11|
|Return on assets||14.0 %|
|Compounded Profit Growth||28%|
|Stock Price CAGR (10 Yr)||25%|
|Return on Equity (10 Yr)||15%|
Market Dependency: The outlook acknowledges that the future performance is contingent on market behaviour, indicating a cautious stance as the company navigates ongoing challenges.
Environmental Investment: The company's commitment to environmental sustainability is evident through stable raw material prices, environmental improvements, and investments in water treatment plants to reuse more water.
3- Varanium Cloud Ltd
Founded in December 2017, Varanium Cloud Limited is a technology business that specializes in offering services related to digital music, video, and blockchain-based financial streaming (for PayFac).
Diversified Service Portfolio: The company operates across multiple key verticals, including digital audio and video content streaming, online payment facilitation (PayFac), digital education content platforms (EdTech), and information technology services. This diversification enhances its market presence and resilience.
Technology-Focused Offerings: The focus on SaaS models, particularly in Voice & Video over Internet Protocol (VoIP) solutions and Infrastructure as a Service (IaaS), positions the company at the intersection of emerging technologies, showcasing adaptability and innovation.
B2B and B2C Revenue Streams: The revenue streams include B2B services for content owners, telecom operators, startups, and SMEs, as well as B2C services for end consumers utilizing digital education platforms and VoIP services.
Diverse Customer Base: Revenue is generated from a range of customers, including business owners, telecom providers, educational institutions, and end consumers. The B2B nature of services caters to small to large businesses across industries.
Founder-Led Visionary Management: The strength of having a founder-led visionary management team provides strategic direction and continuity, ensuring alignment with the company's long-term goals and vision.
Technology Competence: The inclusion of "Transport Technology" and "Low Cost of Delivery" as competitive strengths signifies the company's proficiency in leveraging technology for efficient service delivery while maintaining cost-effectiveness.
Market Dependency: The company's reliance on market conditions, especially in digital audio and video streaming, could pose a vulnerability if there are shifts in consumer preferences or disruptions in the technology landscape.
Geographical Risks: Given the focus on growing subscriber base across existing and new geographies, geopolitical and regulatory risks in different regions could impact the company's operations.
|Dividend Yield||3.78 %|
|Face Value||₹ 5.00|
|Debt to equity||0|
|Return on assets||76.1 %|
|Compounded Profit Growth||917%|
|Return on Equity (10 Yr)||108%|
Expansion Strategies: The company's business strategy, emphasizing the growth of subscriber base, product offerings, and infrastructure efficiency, aligns with the dynamic nature of the digital services market, reflecting a positive outlook.
Market Resilience: The diversity in service offerings, from EdTech to PayFac, positions the company to adapt to market changes. The outlook remains positive with a focus on growth and margin enhancement, indicating a strategic approach to navigate industry challenges.