The Australian market has climbed 1.2% in the last 7 days and is up 11% over the past 12 months, with earnings expected to grow by 12% per annum over the next few years. In this favorable environment, identifying undervalued stocks can offer significant opportunities for investors looking to capitalize on potential growth.

Top 10 Undervalued Stocks Based On Cash Flows In Australia

Click here to see the full list of 41 stocks from our Undervalued ASX Stocks Based On Cash Flows screener.

Let's dive into some prime choices out of the screener.

Codan

Overview: Codan Limited (ASX:CDA) develops technology solutions for various clients including United Nations organizations, security and military groups, government departments, individuals, and small-scale miners, with a market cap of A$2.69 billion.

Operations: Codan's revenue segments include A$326.91 million from Communications and A$219.85 million from Metal Detection.

Estimated Discount To Fair Value: 17.2%

Codan Limited appears undervalued based on cash flows, trading at A$14.84, which is 17.2% below its estimated fair value of A$17.92. The company reported strong financial results for the year ending June 30, 2024, with sales rising to A$550.46 million from A$456.5 million and net income increasing to A$81.39 million from A$67.7 million the previous year. Earnings are forecast to grow at 16.8% per year, outpacing the Australian market's expected growth of 12%.

• The analysis detailed in our Codan growth report hints at robust future financial performance.
• Get an in-depth perspective on Codan's balance sheet by reading our health report here.

IDP Education

Overview: IDP Education Limited facilitates student placements into educational institutions across Australia, the United Kingdom, the United States, Canada, New Zealand, and Ireland and has a market cap of A$4.48 billion.

Operations: Revenue from educational services and training for IDP Education Limited totals A$1.04 billion.

Estimated Discount To Fair Value: 41.7%

IDP Education Limited is trading at A$16.10, significantly below its estimated fair value of A$27.62, suggesting it may be undervalued based on cash flows. Despite a decline in net income to A$132.75 million from A$148.52 million last year, earnings are forecast to grow at 14% per year, outpacing the Australian market's 12.3%. Revenue growth is also expected to exceed the market average (7.4% vs 5.3%).

• The growth report we've compiled suggests that IDP Education's future prospects could be on the up.
• Dive into the specifics of IDP Education here with our thorough financial health report.

Vulcan Steel

Overview: Vulcan Steel Limited (ASX:VSL) operates in New Zealand and Australia, focusing on the sale and distribution of steel and metal products, with a market cap of A$1.01 billion.

Operations: Revenue segments (in millions of NZ$): Steel: 471.29, Metals: 593.04

Estimated Discount To Fair Value: 34%

Vulcan Steel Limited is trading at A$7.7, significantly below its estimated fair value of A$11.67, indicating it may be undervalued based on cash flows. Despite a decrease in net income to NZ$39.99 million from NZ$87.9 million last year and profit margins dropping to 3.8%, earnings are forecast to grow significantly at 32.1% per year over the next three years, outpacing the Australian market's growth rate of 12.3%.

• Our growth report here indicates Vulcan Steel may be poised for an improving outlook.
• Delve into the full analysis health report here for a deeper understanding of Vulcan Steel.

Seize The Opportunity

• Delve into our full catalog of 41 Undervalued ASX Stocks Based On Cash Flows here.
• Shareholder in one or more of these companies? Ensure you're never caught off-guard by adding your portfolio in Simply Wall St for timely alerts on significant stock developments.
• Take control of your financial future using Simply Wall St, offering free, in-depth knowledge of international markets to every investor.

Want To Explore Some Alternatives?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include ASX:CDA ASX:IEL and ASX:VSL.

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