For value investors, a crucial goal is identifying undervalued—and underappreciated—companies to target before the broader market gains an interest and, in theory, corrects the delta between the share price and the true underlying value. Ideally, this would mean investing in shares of a company while that firm is flashing signs of being undervalued but before the stock price increases.
In reality, however, many such companies do not make it onto investors' radars until they have had some price movement—after all, there is no guarantee that the market will, in fact, correct a value stock's pricing to match its underlying value, nor that it will do so on any particular schedule. In this way, finding firms with a recent history of stock price growth but which also continue to present key value indicators may be the ultimate goal for some value investors.
Diebold Nixdorf: Earnings Miss, But Improving Margins and Value Signs Flashing
Diebold Nixdorf (NYSE: DBD) is a financial and retail services company that may be undervalued despite a recent track record of share price gains. DBD shares have climbed by more than 73% in the year leading to December 12, 2024. This is despite a brief dip in early November after the company posted worse-than-expected earnings results, including a surprise loss.
However, Diebold executives did not seem phased by the one-off results, as the company says it expects to achieve the high end of its adjusted EBITDA guidance range by the end of the year.
Diebold is making efforts to streamline its operations and strengthen its profitability and has had nearly two years worth of consecutive quarters of gross margin expansion in the process. Moreover, Diebold has a P/S ratio of just 0.5, marking it as a strong value candidate. This may be why the company is rated a Buy with 30.5% upside potential, despite last quarter's upset.
CMB.TECH: Shipping Company Revamping Operations
CMB.TECH (NYSE: CMBT), formerly known as Euronav, is actually trading at a 52-week low as of December 12, 2024, but this is largely because the company's share price shot upward in mid-2022 and remained there until October 2024, when it fell down to previous levels. The shipping company earned more than $98 million in profit in the latest quarter as it reported a new time charter contract to bring its backlog to over $2 billion.
CMB is making moves to diversify its aging fleet, selling off some of its vessels and acquiring new ones. Simultaneously, the firm is making efforts to decarbonize its operations, which is part of a growing trend toward renewable energy in the shipping space. All of these efforts may draw investor attention.
The shipping industry could be on tough footing heading into 2025 given the global political climate, so it's possible CMB has not yet reached its bottom. Still, with a forward P/E ratio of 1.6, the firm already appears undervalued.
StealthGas: Stock Dip, But Strong Fundamentals
Another relatively small player in the shipping and transportation industry, StealthGas Inc. (NASDAQ: GASS), primarily serves liquefied natural gas producers worldwide. This company, which has a market cap of just $190 million as of December 13, 2024, has a P/S ratio of 1.2 and a debt-to-equity ratio of just 0.13.
StealthGas' latest quarterly results, released on November 25, show a strongly profitable company growing quickly. The firm reported nearly $56 million in net income for the first three quarters of the year, an all-time record and a 29% increase over the same period in 2023. It also saw revenues for the quarter increase by nearly 17% year-over-year.
The firm is also aggressively paying down debt, making a total of about $107 million in debt repayments in the first three quarters of 2024 and holding a significant cash balance to continue these efforts.
The fact that GASS shares are down almost 18% in the year leading to December 13, 2024, is perhaps more a reflection of the challenges and uncertainty facing the broader shipping industry in recent months than of StealthGas itself. StealthGas is not yet rated by Wall Street analysts, but value investors may nonetheless take note of indicators suggesting it could be poised for a breakout in more favorable industry-wide conditions.
