Buying undervalued ASX stocks seems like an obvious thing to do, but how are we supposed to know what is good value?
I'd suggest there are a few different ways to make that call.
For some businesses, it can be if they're trading at a significant discount to how much their asset base is worth. For others, it can be when they appear to be trading at smaller multiple of earnings than they should do, which can be measured with the price/earnings (P/E) ratio or other similar ratios.
In this article, I'll highlight a business of each example, starting with a large asset discount.
Bailador Technology Investments Ltd (ASX: BTI)
Bailador is an investment company that targets relatively small technology businesses which have strong potential.
The portfolio has focused on ideas that have demonstrated strong unit economics, the ability to produce repeat revenue, have large addressable markets, and exhibit the potential to expand internationally.
It's invested in areas like hotel management and revenue generation software, digital healthcare, financial advice and investment management, tours and activities booking software, volunteer management software and more.
These businesses are collectively growing revenue at a fast pace, increasing the underlying value. The software nature of these companies means their margins can quickly rise because of the low cost of selling more subscriptions. I think they have strong outlooks for profit growth and capital gains.
Despite the very promising outlook of these businesses, this undervalued ASX stock is priced at a discount of approximately 40% to the pre-tax net tangible assets (NTA) of $1.85 as of 31 July 2025.
Siteminder Ltd (ASX: SDR)
Siteminder describes itself as the world's leading hotel distribution and revenue platform. It helps its hotel subscribers generate more than 125 million reservations worth over A$80 billion in revenue each year.
The Siteminder share price is down around 20% compared to where it was in November 2024, as the below chart shows. I think it now looks like a very undervalued ASX stock.
This decline occurred despite the business continuing to grow its revenue generation and margins. In the FY25 half-year result, annualised recurring revenue increased 18.4% to $216.2 million and the gross profit margin rose 118 basis points (1.18%) compared to the second half of FY24 to 66.9%, thanks to scale and operating leverage.
I'm expecting the company's underlying operating profit (EBITDA) margin and cash flow to increase in the coming years as more revenue flows through the business.
The broker UBS forecasts that Siteminder's revenue could rise from $226 million in FY25 to $479 million in FY29, a rise of 112%. I think this could be a strong driver of the Siteminder share price in the coming years.
