Beware these ‘undervalued’ stocks

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The top 50 most undervalued stocks, based on broker share price targets relative to stock prices, should be treated with caution.

When a veteran Australian equities fund manager was asked to comment on a list of the most “undervalued” stocks listed on the ASX, he laughed and said: “I have never trusted analysts’ share price targets.”

The wizened fundie says the problem with share price targets is that they are driven by the pressure on analysts to attract broking business. Also, he says the targets can be slashed at short notice with none of the “real world” consequences that hit the buy side. The presentation issued with the affirmation of guidance said Breville’s global revenue opportunity was $9.7 billion, or nine times its current annual revenue.

The huge discounts attached to News Corp and Nine Entertainment, which publishes this masthead, reflects the darkening economic environment caused by rising interest rates and geopolitical tensions. Buy now, pay later heavyweight Block has the largest analyst coverage of all the companies in this list of stocks thanks to its American domicile. That should give investors confidence that the consensus figures for its share price target are sound.

Pinnacle shares have halved this year. The stock hit a record high last year on the back of the sterling performance numbers achieved by its active equities satellite Hyperion, which has struggled this year to match previous stellar performance numbers.

 

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