One way you can spot a good deal on the markets is by looking at a company’s book value and comparing it to its share price. Stocks that are trading below book value usually do so because either the company is inherently risky (perhaps heavily dependent on a commodity) or because there has been a lot of bearish activity that has sent the share price very low and likely caused it to be oversold.
Buying undervalued stocks can be challenging, however, since there might not be a lot of positive activity in the near future, and it may take some time for things to turn around, and there’s no guarantee that they ever will.
The three stocks below currently trade below their book values, and I believe they are undervalued and will rise from their current price levels.
Corus Entertainment (TSX:CJR.B) has had a disastrous 2018; it has seen its share price crash nearly 70% since the start of the year. The decline has been persistent; even in the past month the stock has declined by more than 10%.
Corus trades at around just half of its book value and could be a great long-term buy. The company has many good assets and includes a portfolio of popular channels that remain in high demand in Canada. Its business model hasn’t been broken, and although the company is coming off a disappointing quarter, its fundamentals remain strong.
The challenge is knowing just where the bottom is, as the stock continually finds ways to sink deeper. However, if Corus can come out with an improved quarter when it comes time to report, it could be just what the stock needs to get out of this free fall.
Home Capital Group (TSX:HCG) hasn’t had as horrible a year as Corus, but it has still declined more than 15%, and that’s after a 2017 that saw the stock go over a cliff after a scandal about misleading investors rocked the company and its share price.
Home Capital has been able to put some distance between itself and that negative press, but it simply hasn’t been enough to make investors bullish on the stock. Currently, the stock trades at about 0.6 times its book value and only nine times its earnings.
The stock could have a lot of upside as the economy continues to do well and with interest rates on the rise.
Hudson’s Bay (TSX:HBC) is trading a little below its book value, and while it may not be trading at a heavy discount like the other two stocks on this list, it still offers very good value. While investors may be understandably bearish on the company’s performance and its struggle to turn a profit, HBC’s strong diversification and high-value real estate assets suggest that the company might not be in such bad shape.
With over $14 billion in sales in the past 12 months and the company continuing to expand, its financials could get much stronger.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor David Jagielski owns shares of CORUS ENTERTAINMENT INC., CL.B, NV.