2 high quality, under-the-radar shares I’m watching this month

As August reporting season gets underway in earnest this week, investors will turn their attention to earnings results.

While major companies such as Woolworths Limited (ASX: WOW) will receive a huge amount of investor attention, there’s a subset of other companies which could fly under the radar.

Amongst the larger listed stocks which could fly under the radar are newly listed companies which are yet to be picked up for research coverage by brokers.

Here are two stocks I’ll be following closely.

Link Administration Holdings Ltd (ASX: LNK) undertook an initial public offering (IPO) in October 2015 which means the company will report its first full year results as a listed company this month. These results are scheduled to be released on August 24.

Having floated at $6.37, the shares have performed well since IPO trading as high as $9. Currently, the shares are trading at $8.25 for a market capitalisation of around $3 billion.

Link achieved a solid interim result (which was reported back in February) at which point Link reaffirmed its pro forma prospectus forecasts.

Here’s the guidance that was provided in the prospectus which investors will be expecting to see met later this month.

  • Pro Forma revenue of $750 million
  • Pro Forma net profit after tax before amortisation and before significant items of $95.5 million

Reliance Worldwide Corporation Aus P Ltd (ASX: RWC) listed in April 2016 and now boasts a market capitalisation of $1.7 billion, up from a valuation of $1.3 billion at the time of listing.

Having floated at $2.50, the shares are currently trading at $3.30.

Given how recently the stock hit the ASX – with only a couple of months trading left for the year – there really shouldn’t be any surprises when the company reports.

Of more importance to investors will be Reliance’s outlook statement which should reinforce financial year (FY) 2017 forecasts.

Here are the FY 2016 and FY 2015 forecasts from Reliance’s prospectus.

  • FY 2016 pro forma net sales of $535 million, FY 2017 pro forma net sales of $588 million
  • FY 2016 pro forma net profit after tax (NPAT) of $51.3 million; FY 2017 pro forma NPAT of $62.6 million

Foolish takeaway

Data sourced from Reuters shows that only five analysts contributed to the consensus earnings estimates for Link and Reliance.

In contrast, Reuters consensus earnings estimate for Woolworths is taken from the average of 14 analysts.

Both Link and Reliance are market leaders in their respective industries and as ASX “debutantes” they are arguably still flying under the radar of many investors.

That certainly doesn’t guarantee undervaluation – in fact, in my opinion they both look to be fully valued – however, less widely followed stocks are, in my opinion, more likely to trade out of line from their intrinsic worth.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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