STO on AFR undervalued stocks list

STO well placed on the Finn 'stocks to buy' list today.

Check how much your stock is undervalued

07 Jan 2019 — 11:00 PM


Investors looking for stockmarket bargains could well start with Chanticleer's analysis of the top 100 companies ranked by the percentage discount to the consensus share price targets of the country's leading broking analysts.
The analysis reveals that many quality companies with good prospects in sectors of the economy that should do well in the year ahead are trading at huge discounts to the consensus earnings estimates of brokers.
The data prepared for Chanticleer by S&P Capital IQ suggests that the Australian sharemarket has been oversold in many sectors. Share prices, in many cases, bear no resemblance to the earnings prospects of leading companies.

Some fast growing companies in the ASX 100 have very significant discounts to their mean target prices.  Louie Douvis
The data published here shows the percentage discount to the mean target price of all analysts which supply data to S&P Capital IQ. The mean target price was chosen rather than the median to remove the potential distortion from analysts who are significant outliers.
Share price targets were chosen as a key barometer of value because more often than not they are the same as the valuation of a company based on discounted cash flows (DCF). Analysts often calibrate their DCF valuations against a sum of the parts valuation which applies market price earnings multiples.

These disciplined processes are taken seriously by the analysts involved and nothing is published by any firm these days without being scrutinised by the compliance department.
Emerging patterns

Take a closer look at the numbers and you will see a number of patterns emerging.
First, there are several media companies, including the publisher of this newspaper, with discounts to the mean target price of more than 30 per cent. It would seem the market is expecting recession like conditions in the advertising sector but the analysts are not.
Even the storied News Corp, which has fallen in value by about 30 per cent from its recent high, is trading at a 23 per cent discount to its mean target price.