BR Analysis: Top 10 undervalued companies listed on the Bucharest Stock Exchange

Aurel Dragan 07/05/2018 | 08:22

The Bucharest Stock Exchange (BSE) is a good place for investments if you want a high return for your money. Of course, it is not risk-free investment but one with the highest risk available. Still, there are stocks you can find that show undervaluation and may deliver higher return in the next period.

One of the most popular ways to establish if a company is to check the “price to earnings ratio”. In essence, P/E Ratio or PER indicates the amount of RON an investor can expect to invest in a company in order to receive one RON of that company’s earnings. This is why PER is sometimes referred to as the price multiple because it shows how much investors are willing to pay per RON of earnings. If a company were trading at a PER of 10, the interpretation is that an investor is willing to pay RON 10 for RON 1 of current earnings.

There are many other ways to assign a relative value to a stock and before making decisions to invest those should also be used, but PER is the most popular one and it gives a good starting point for valuation. In order to calculate PER one must know the indicator for earnings per share (EPS), which usually takes the last four quarters profit and divides it to the number of shares.

We took a look at BSE April report to see which companies are showing a good PER and took into consideration the companies listed on the main market that don’t have a negative PER or are in a difficult situation.

One of the best ratios is to be found at Alumil Rom Industry, a company with activity in wholesale of metals and metal ores. ALU has a PER of 4.45 after 2017 financial results of RON 83.55 million in operating income and RON 12.65 million of net profit. Alumil has a market capitalization of RON 55.3 million.

The next company is Prebet Aiud, manufacturer of concrete products for constructions purposes, that has a PER of 4.95. Last year PREB had an operating income of RON 25.57 million, but it registered losses of RON 468,458. The market cap of Prebet is RON 12.9 million.

COMPA Sibiu is the next on our list with a PER of 5.65. The manufacturer of other parts and accessories for motor vehicles has a market capitalization of RON 212.2 million and in 2017 had a operating income of RON 712.26 million and a net profit of RON 38.1 million.

The national operator of the electricity transmission system Transelectrica is next on our list with a PER of 5.99. TEL is one of the biggest companies listed with a market cap of RON 1.59 billion, but it looks undervalued. But after paying liabilities of RON 99 million, resulting a taxation decision of ANAF the national Power Grid Company Transelectrica registered an accounting loss of RON 47.9 million for 2017, according to the last report of the company.

Electroarges Curtea de Arges is next, with a PER of 6.02. The manufacturer of electric domestic appliances with a market capitalization of RON 98.7 million had an operating income of RON 192.2 million in 2016 and a net profit of RON 16.57 million.

Construction company Napoca is next with a PER of 6.19. The company with activity in construction of residential and non-residential buildings has a market cap of RON 10.03 million. In 2017 the company had an operating income of RON 60.9 million and a net profit of RON 1.6 million.

The next company is Sinteza, a manufacturer of other organic based chemicals, with a PER of 6.99. The company has a market cap of RON 18.1 million and in 2017 had a total income of RON 24.24 million and losses of RON 5.6 million.

IAR Brasov,  air and spacecraft and related machinery manufacturer  is next on the list with a PER of 7.10. The market capitalization of IARV is RON 162.36 million and last year had an operating income of RON 203.34 million and a net profit of RON 24.19 million.

Cemacon, manufacturer of bricks, tiles and construction products in baked clay, is the next on our list with a PER of 7.12. The manufacturer had an operating income of RON 94.65 million in 2017 and a net profit of 13.22 million. The market capitalization of CEON is at RON 91.19 million.

Number ten on our list is Turbomecanica with a PER of 7.51. The manufacturer of air and spacecraft and related machinery had last year an operating income of RON 107.6 million and a net profit of RON 13.65 million. Market capitalization of TBM is at RON 99.01 million.

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