6 Most Undervalued Stocks To Buy In August 2024

In this article, we will discuss

• What are Undervalued Stocks and How to Identify Them?
• 6 Top Undervalued Stocks To Buy In August 2024
• Conclusion

Of the many long-term investment strategies that investors use, very few are as popular as the value investing strategy. Value investing is an approach where you identify and invest in stocks trading below their intrinsic value, known as undervalued stocks. Investors who follow this strategy buy top undervalued stocks and hold them until the market recognises their true worth. This often leads to significant long-term gains, especially if the stocks are fundamentally strong.

If you plan to stay invested for a long time, including a few undervalued shares in your portfolio could help you get closer to your financial goals much faster. In this article, we are going to explore 6 underpriced stocks as of August 2024, along with their key financial metrics and insights into their businesses.

What are Undervalued Stocks and How to Identify Them?

Undervalued stocks are shares of companies trading at a price lower than their intrinsic or book value per share (BVPS). The book value is calculated by subtracting the total liabilities of a company from its total assets and dividing the resulting figure by the total number of outstanding shares.

Imagine a company called ABC Limited with a book value of Rs. 520 per share. The company’s shares, however, are currently trading at Rs. 465 per share. Since the market price is lower than its book value, ABC Limited is termed an undervalued stock.

Such discrepancies in the book value and the market price of a stock can occur due to a variety of different reasons. These include market inefficiencies, temporary setbacks, or oversight of the investment community.

One of the many crucial metrics that investors use to identify underpriced stocks is the price-to-book ratio or P/B ratio. The price-to-book ratio is a financial metric that establishes a relationship between the market price of a stock and its book value. The ratio is computed by dividing the current market price of the stock by the book value.

A P/B ratio of 1 less than 1, however, means that the stock is undervalued. A ratio of 1 suggests that the stock is trading on par with its book value, whereas a ratio above 1 indicates that the stock is overvalued.

6 Top Undervalued Stocks To Buy In August 2024

Now that you know what undervalued stocks are and how to identify them, here is a table containing a list of undervalued stocks you can consider investing in, along with their key fundamental metrics.

Note: All of the values are valid as of August 12, 2024

Let us now look at these 6 currently undervalued stocks in a bit more detail.

• JM Financial Limited

JM Financial Limited is a leading integrated financial services group in India, offering a diverse range of services including investment banking, wealth management, securities, asset management, and alternative asset management. Over the years, the company has built a reputation for having strong corporate relationships and for its ability to navigate complex financial transactions.

In fact, JM Financial’s investment banking division has been involved in numerous high-profile mergers and acquisitions, initial public offerings, and private equity deals, cementing its position as a key player in India's corporate finance sector. More recently, the company has been focusing on expanding its retail financial services offerings, which include mortgage lending and wealth management. The low P/B ratio of JM Financial Limited makes it one of the most undervalued stocks in India.

• Union Bank of India

The Union Bank of India is one of India's largest public-sector banks. In recent years, the bank has undergone a major transformation, including a merger with two other public-sector banks, namely, Andhra Bank and Corporation Bank, in 2020.

As a result of the merger, Union Bank of India currently has a network of more than 8,400 branches and 9,300 ATMs across India. The bank has also expanded its presence overseas, with branches in Dubai and Australia.

Additionally, the Union Bank of India also has a foreign subsidiary in London and a banking joint venture in Malaysia. To enhance its online and mobile banking services, the bank has also been investing heavily in digital transformation. Thanks to the various initiatives, operational efficiency and customer experience have been vastly improved.

• Hathway Cable and Datacom Limited

Hathway Cable & Datacom Limited is one of the fastest-growing leading cable television and broadband internet service providers in India. The company has a wide network spread across most major cities in India and is rapidly expanding its presence in Tier-2 and Tier-3 cities. Known predominantly for its cable TV services, Hathway seamlessly transitioned into the fibre-optic internet connectivity space.

In 2018, Reliance Industries Limited purchased a majority stake in Hathway Cable and Datacom Limited. As a result, the company gained access to additional resources and strategic support, which it has leveraged to rapidly expand its infrastructure and service quality. Hathway is well poised to take advantage of increasing internet penetration in India, making it one of the top undervalued growth stocks you can consider investing in.

• Steel Authority of India Limited (SAIL)

Steel Authority of India Limited (SAIL) is India’s largest state-owned steel-making company and one of the most attractive on this list of undervalued stocks. The company’s product portfolio is diverse and includes TMT bars, galvanised products, wire rods, plates, hot-rolled and cold-rolled steel, wheels and axles, pipes, and stainless steel products, among others.

Currently, SAIL has 5 integrated steel plants in the states of Chattisgarh, West Bengal, Odisha, and Jharkhand. Additionally, it also has 3 special steel plants and a ferroalloy plant. Apart from manufacturing a wide range of steel and steel-related products, the company also has the distinction of being the second-largest producer of iron ore and the second-largest network of mines in India.

• Aditya Birla Capital Limited

A part of the Aditya Birla Group, Aditya Birla Capital Limited (ABCL) is a holding company with as many as 10 subsidiaries and joint ventures (JVs). Through its subsidiaries and JVs, ABCL offers a wide range of financial services. Some of the services include life insurance, asset management, lending and financing, general insurance, stockbroking services, pension fund management, and health insurance. Being a heavily diversified company, Aditya Birla Capital Limited is one of the top undervalued growth stocks in India.

The total assets under management (AUM) of Aditya Birla Capital Limited and its subsidiaries is Rs. 4.63 lakh crore as of June 30, 2024. As of the same date, the company’s consolidated loan book stood at Rs. 1.27 lakh crore. One of the advantages of the company is its extensive nationwide network, encompassing more than 1,505 branches and 2 lakh agents and partners.

• Grasim Industries Limited

Founded in 1947, Grasim Industries Limited started operations as a manufacturer of textiles in India. The company later diversified its business by entering other sectors and industries, namely, speciality chemicals, paints, cement, and renewable energy. The company is a part of one of India’s largest conglomerates, the Aditya Birla Group, and is among the top undervalued stocks to invest in.

Grasim Industries Limited recently established 3 paint manufacturing plants, all of which are presently operational. The company plans to expand the total number of paint manufacturing plants to a total of 6 in the near future. Grasim Industries has three major subsidiaries:Ultratech Cement, Aditya Birla Capital, and Aditya Birla Renewables.

Conclusion

With this, you must now be aware of the top 6 undervalued stocks in India as of August 2024. Each of these companies has unique strengths and a strong potential for future growth and stock price appreciation.

However, it is important to remember that investing in undervalued stocks requires careful analysis and a long-term perspective. Some stocks may take years until their price reflects their intrinsic value. Additionally, there is always the risk of unforeseen factors impacting stock performance. Therefore, it is important to conduct thorough research into the company, its business, and fundamental factors before investing in an undervalued stock.

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