The 3 latest undervalued ASX 200 stocks for your watchlist

There are 3 ASX shares that might interest those looking for value buys on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO). What's more, one of these stocks just got upgraded by Goldman Sachs.

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Value investors have a new S&P/ASX 200 (Index:^AXJO) (ASX:XJO) stock to put on their watchlist. The bounce in the Brambles Limited (ASX: BXB) share price may have more ways to go after a leading broker upgraded its recommendation on the logistics group.

The Brambles share price inched up 0.3% to $12.16 in after lunch trade as it continues to claw back from the big sell-off following its disappointing full year results in August.

There's still around a 20% upside to the stock over the next 12-months, according to the calculations by Goldman Sachs who lifted its rating on the stock to "buy" from "neutral".

A good discount buy

The broker turned bullish on the stock after noting that the Brambles share price is trading at a deep historical discount to both the S&P/ASX 100 (Index:^ATOI) (ASX:XTO) index and the All Ordinaries (Index:^AORD) (ASX:XAO) index.

"We consider the business' current valuation multiples in light of the c.12% contraction since its FY19 result in August," said Gold Sachs.

"On a relative EV/EBITDA basis vs. the ASX-100 and All Industrials, BXB is near historical lows at a 31% and 41% discount respectively, and well below its historical averages of 13% and 8%.

"With our increasing confidence in the earnings trajectory post the recent 1Q19 trading update, we expect this discount to close and upgrade to Buy."

Earnings stability improving

Brambles September quarter trading update didn't contain any unpleasant surprises, and was in fact, better than what Goldman Sachs was anticipating. Revenue growth for the period increased 5%, which was at the top-end of management's forecast and ahead of the 4.5% that Goldman was forecasting.

While the beat is relatively small, it's safe to say there's not much expectation priced into the stock.

The revenue lift was largely attributed to an increase in negotiated contract prices in North America, which will give investors comfort that the group can weather a near-term slowdown in volumes.

Other value stocks worth considering

But Brambles isn't the only value stock with the potential to outperform the broader market in 2020. I think the Nufarm Limited (ASX: NUF) share price is also well placed to run ahead of the pact thanks to the launch of its omega-infused canola seed product.

Another bargain stock that has caught the eye of brokers is St Barbara Ltd (ASX: BXB). A number of brokers have followed JP Morgan to reiterate their "buy" recommendation on the beaten down gold miner following the release of its disappointing quarterly production report.

While the near-term performance of its gold mines is under a cloud, the longer-term outlook for St Barbara is bright and the stock is trading at a steep discount to its peers.

Looking for other attractively priced stocks to put on your watchlist? You will want to read this free report from the experts at the Motley Fool. Follow the free link below to find out more.

Motley Fool contributor Brendon Lau owns shares of Nufarm Limited. Connect with him on Twitter @brenlau.

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 Scott Phillips.

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