Financial service stocks generally perform in-line with the economy, mainly because these businesses offer services ranging from investment banking to consumer financing, which are in demand during prosperous economic times. Australian Finance Group and Blue Sky Alternative Investments are financial stocks on my list that are potentially undervalued. This means their current share prices are trading well-below what the companies are actually worth. Investors can benefit from buying these financial companies while they are discounted, because they gain when the market prices move towards the stocks' true values. Below is a list of stocks I've compiled that are deemed undervalued based on the latest financial data.
Australian Finance Group Limited ( ASX:AFG )
Australian Finance Group Limited, together with its subsidiaries, provides mortgage broking services in Australia. Started in 1994, and now run by David Bailey, the company currently employs 199 people and with the market cap of AUD A$324.37M, it falls under the small-cap category.
AFG's shares are currently hovering at around -57% beneath its actual level of $3.52, at a price tag of AU$1.51, based on its expected future cash flows. The mismatch signals a potential chance to invest in AFG at a discounted price. What's even more appeal is that AFG's PE ratio is trading at 7.64x against its its Mortgage peer level of, 18.77x suggesting that relative to other stocks in the industry, we can buy AFG's stock at a cheaper price today. AFG is also strong financially, as short-term assets amply cover upcoming and long-term liabilities. More detail on Australian Finance Group here .
Blue Sky Alternative Investments Limited ( ASX:BLA )
Blue Sky Alternative Investments Limited is a private equity firm. Started in 2006, and headed by CEO Robert Shand, the company now has 116 employees and has a market cap of AUD A$411.41M, putting it in the small-cap category.
BLA's shares are currently floating at around -49% lower than its intrinsic value of $10.41, at a price tag of AU$5.31, according to my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Furthermore, BLA's PE ratio is around 17.9x relative to its Capital Markets peer level of, 18.64x suggesting that relative to its comparable set of companies, you can buy BLA's shares at a cheaper price. BLA is also strong financially, as short-term assets amply cover upcoming and long-term liabilities. More detail on Blue Sky Alternative Investments here .
Genworth Mortgage Insurance Australia Limited ( ASX:GMA )
Genworth Mortgage Insurance Australia Limited, through its subsidiaries, engages in the loan mortgage insurance business in Australia. Established in 1965, and now led by CEO Georgette Nicholas, the company size now stands at 216 people and with the market cap of AUD A$1.13B, it falls under the small-cap category.
GMA's stock is currently floating at around -27% beneath its intrinsic value of $3.25, at a price of AU$2.38, according to my discounted cash flow model. The mismatch signals a potential chance to invest in GMA at a discounted price. Also, GMA's PE ratio is currently around 8.01x relative to its Mortgage peer level of, 18.77x meaning that relative to other stocks in the industry, we can purchase GMA's shares for cheaper. GMA is also a financially healthy company, as current assets can cover liabilities in the near term and over the long run. More detail on Genworth Mortgage Insurance Australia here .
For more financially sound, undervalued companies to add to your portfolio, explore this 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.
