Focusing on smaller stocks which aren’t followed by practically every analyst and fund manager can give investors an advantage in that they can discover under-researched companies which have the potential to also be undervalued.
Here are four companies, each with market capitalisations below $600 million which appear to not only be undervalued but which also (based on consensus data provided by Morningstar) are trading on attractive forward dividend yields.
Countplus Ltd (ASX: CUP) is a network of accounting practices operating from approximately 37 offices which are spread throughout 19 cities and towns across Australia. The company has the potential to lead further consolidation of this fragmented industry. With a forecast financial year (FY) 2015 price-to-earnings (PE) ratio of 12.7 and dividend yield of 6.7% fully franked, this stock could be one to count on going up.
360 Capital Industrial Fund (ASX: TIX) is a manager of property assets. With a FY 2015 forecast for earnings per share (EPS) and unfranked dividends per share of 20.6 and 19 cents, the stock is trading on a PE and yield of 10.5 and 8.7% respectively.
Wotif.com Holdings Limited (ASX: WTF) has seen its share price dramatically sold down in the past 12-months as investors have become increasingly concerned about the entry of competitors into the domestic online travel and accommodation marketplace. The sell-off has however made the PE and yield that Wotif.com trades on significantly more appealing. Based on consensus numbers, the stock is trading on a FY 2015 PE of 13.2 and a fully franked yield of 7.6%.
Pacific Brands Limited (ASX: PBG) is an Australian-based wholesaler and retailer of apparel, footwear and home wares. The company is best known for its ownership of the Bonds brand. With a forecast for EPS of 6.6 cents in FY 2015 and dividends per share of 4.2 cents, the stock is trading on an enticing PE of 7.9 and fully franked dividend yield of 8%.
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Motley Fool contributor Tim McArthur owns shares in Pacific Brands Ltd.