MRFI and Changyou.com Are Two Undervalued Stocks in an Overvalued Market

NEW YORK (TheStreet) -- The five-year bull market may seem like it will last forever but inevitably it will end. Right now the market has become so saturated with new investors looking to strike it rich that there are not many opportunities left for wise value investors.

Well, there are a few undervalued needles left in this haystack. Let's start with  MFRI (MFRI).

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MFRI is an engineering and manufacturer of piping systems and filtration products based in Niles, Ill. The company is highly specialized in environmental hazard prevention, a niche that is certainly not expected to die out anytime soon considering the increasing regulations on pollution control.

MFRI's products are used internationally, and the company is further expanding its international reach having recently formed a joint venture with Colombia-based Tayrona Steel Pipe to manufacture pre-insulated pipe for the oil and has markets in Central and South America.

MFRI has a market cap of nearly $79 million and it's stock, at around $11, is down 24% for the year to date. However, the shares are trading at an extremely modest price/earnings ratio of 3.74 and a price to book ratio of 1, making it one of the most fundamentally undervalued companies in an industry dominated by Tyco (TYC), which trades at a 27 P/E and 4 P/B.

Although MFRI had a meager fiscal 2012 and 2013 performance primarily due to increased capital expenditures and lower revenue, respectively, it closed 2014 with $21 million in net income.

MFRI's future is largely dependent on governmental regulations and the world economy. As long as interest rates remain low and environmental sentiment remains high, infrastructure will continue growing -- which increases demand for MFRI's piping and filtration products.

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