6 undervalued emerging market stocks after six week low

By James Dennin for Kapitall.

The global stock market had its best day of the summer on Monday, seeing its greatest gains since April. The MSCI Emerging Markets advanced 1.5%, the most since February. 

Most the gains may be attributed to a global consensus that risk from several crises is abating. Russia stopped drilling its war planes in the Ukraine, US airstrikes directed at ISIS seemed mostly successful, and there is even talk of improving prospects for Israeli and Gaza peace talks. 

What all that points to is a surge in confidence at the end of a tumultuous summer. The VIX volatility index fell 12 points throughout the day Monday. 

With that in mind we decided to screen emerging market stocks for the most promising names. We built a list of Chinese, Russian, Indian, and Latin American equities, which also looked undervalued relative to  levered free cash flow to enterprise value.

This means that stock has a lot of extra cash on its hands after paying off taxes and expenses, giving it flexibility as it pursues more growth. Do you think emerging markets will continue to recover this summer? 

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. Gafisa S.A. ( GFA): Operates as a homebuilder in Brazil. Market cap at $553.95M, most recent closing price at $2.59.

 Levered free cash flow at $294.86M vs. enterprise value at $1.31B (implies a LFCF/EV ratio at 21.44%).  

 

 

2. GOL Linhas A ( GOL): Operates as a low-cost low-fare airline in Latin America. Market cap at $1.38B, most recent closing price at $5.01.

Levered free cash flow at $310.58M vs. enterprise value at $2.91B (implies a LFCF/EV ratio at 10.7%).  

 

 

3. Industrias Bachoco S.A.B. de C.V. ( IBA): Operates as a poultry producer in Mexico. Market cap at $2.14B, most recent closing price at $42.78.

Levered free cash flow at $245.88M vs. enterprise value at $2.15B (implies a LFCF/EV ratio at 11.43%).  

 

 

4. Pampa Energia SA ( PAM): Market cap at $268.12M, most recent closing price at $5.10.

Levered free cash flow at $97.81M vs. enterprise value at $891.23M (implies a LFCF/EV ratio at 10.21%).  

 

 

5. Charm Communications Inc. ( CHRM): Operates as an advertising agency in China. Market cap at $80.29M, most recent closing price at $3.97.

Levered free cash flow at $12.51M vs. enterprise value at $62.37M (implies a LFCF/EV ratio at 33.32%).  

 

 

6. China XD Plastics Company Ltd. ( CXDC): Through its subsidiary, Harbin Xinda Macromolecule Material Co. Market cap at $225.79M, most recent closing price at $4.72.

Levered free cash flow at $29.48M vs. enterprise value at $183.09M (implies a LFCF/EV ratio at 16.28%).  

 

 

​(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, 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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