Four undervalued stocks overseas to consider as imports likely rise

By James Dennin for Kapitall.

The trade gap unexpectedly shrank this quarter, which is  even more unexpected given the serious cash  American broadcasters sent overseas for rights to the World Cup.  

US imports fell off, mostly a result of a decline in energy imports, prompting some to argue the US is moving more quickly than previously thought toward energy independence. 

That being said, the surprise drop off makes a spike in imports more likely, particularly given that US consumer and industrial spending is expected to rise over the next several months. 

That, and a relatively competitive US economic position compared to other advanced nations means that overseas companies with extra US exposure could benefit. 

With that in mind we screened American Deposit Receipts (ADRs, foreign stocks that trade on US exchanges) that were either in consumer spending or industrial markets. We then found undervalued companies that fill this bill using the levered free cash to enterprise value ratio (LFCF/EV). 

This suggests that the company has a lot of extra cash relative to other companies its size, after accounting for tax and debt payments. 

Do you think rising US imports could boost these overseas names? Use the list below to begin your analysis, and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

 

1. China XD Plastics Company Ltd. ( CXDC): China XD Plastics Company Limited, through its subsidiary, Harbin Xinda Macromolecule Material Co. Market cap at $261.84M, most recent closing price at $5.38.  

Levered free cash flow at $29.48M vs. enterprise value at $192.82M (implies a LFCF/EV ratio at 15.29%).  

 

2. Industrias Bachoco S.A.B. de C.V. ( IBA): Operates as a poultry producer in Mexico. Market cap at $2.72B, most recent closing price at $54.21.  

Levered free cash flow at $249.93M vs. enterprise value at $2.11B (implies a LFCF/EV ratio at 11.85%).  

 

3. Sony Corporation ( SNE): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $18.74B, most recent closing price at $18.02.  

Levered free cash flow at $3.84B vs. enterprise value at $24.14B (implies a LFCF/EV ratio at 15.91%).  

 

4. Gafisa S.A. ( GFA): Operates as a homebuilder in Brazil. Market cap at $643.13M, most recent closing price at $2.94.  

Levered free cash flow at $303.66M vs. enterprise value at $1.39B (implies a LFCF/EV ratio at 21.85%).

 

 

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, levered-free cash sourced from Yahoo! Finance. All other data sourced from Finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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