Are these stocks screaming buys or value traps best avoided?

Wed 16 Nov 22, 6:21pm (AEST)

Key Points

  • At face value it's not immediately apparent why these six stocks appear to be heavily discounted
  • All stocks are trading well below the market's average price to earnings ratio (PE) of 13.35 times
  • A low price isn’t always synonymous with “great value”

Knowing whether stocks are trading in ‘value play’ or ‘value trap’ territory doesn’t always become apparent to investors until it’s often too late to capitalise on it.

But if the market’s average price to earnings ratio (PE) of 13.35 times tell us anything meaningful, it’s that the following stocks appear – at face value – to be remarkably cheap.

What could also provide a proxy on untapped value is the 70%-plus discount these stocks are currently trading at relative to consensus estimates.

If the market is right, why is the gulf between consensus estimates and current price so great?

Given that a low price isn’t always synonymous with “great value” Market Index has provided a snapshot on each stock so you can make up your own mind.

Are these six stocks seriously undervalued?



% from target price

Market cap


Current price

1 Year Return

PE Ratio

Return On Capital FY21
















Communication Services






Global Invest














Communication Services





SG Fleet



















The smallcap software and services provider is trading below its 20-simple moving average which is also trending lower.

 Shares rocketed higher when the company announced that it would be selling its Accountants Practice Management Group division for an expected $100m back in May.

The company rewarded shareholders with a special dividend of $0.57 per share.

The first half result – normalised earnings (EBITDA) of $18m, up 6% - was in-line with Morgan Stanley's forecast.

The company paid a fully franked interim dividend of $0.03 per share.

The stock is currently trading at a 101% discount to consensus.

Morgan Stanley has an Equal-weight rating and target price of $1.25.

Based on Morningstar’s fair value of $0.86 the stock appears to be undervalued.

Reckon share price over 12 months.

Frontier Digital Ventures

The company runs a highly diversified global online classifieds business that the market has struggled to understand.

What makes the stock appear cheap is the market’s unwillingness to ascribe any value to Zameen, a leading property portal based in Pakistan.

Weak Asian currencies are also offsetting the company’s progress in A$.

Consensus is Strong Buy and based on Morningstar’s fair value of $1.54 the stock appears to be undervalued.

Morgans improved its earnings (EBITDA) margin expectations following a 3Q trading update and increased its target to $1.28.

Rating is Add.

Frontier Digital Ventures share price over 12 months.

Navigator Global Investments

To the uninitiated, Navigator is a listed Australian holding company for US-based Lighthouse Investment Partners, LLC (Lighthouse).

Due to organic growth and decent investment performance, the investment manager posted positive growth in assets under management (AUM) in the September quarter.

As a result, Macquarie recently retained its Outperform rating and $2.19 target price.

Consensus is Strong Buy.

Based on Morningstar’s fair value of $2.08 the stock appears to be undervalued.

Navigator Global Investments share price over 12 months.

Airtasker Ltd

To the uninitiated, Airtasker’s platform matches up people who need work with individuals or businesses that want to do the work.

In the first quarter (1Q) of FY23, revenue (excluding the acquired business Oneflare) increased by 36% to $8m.

Following a 1Q trading update, Morgans notes solid year-on-year growth for the domestic business and early signs of marketplace performance offshore.

Gross marketplace volume (GMV) rose by 82% on the previous period.

The broker retains an Add rating, but the broker’s price target falls to $0.95 from $1.05 due to higher opex forecasts for the international build out and after adjusting for lower peer multiples.

Consensus is Moderate Buy.

Based on Morningstar’s fair value of $0.75 the stock appears to be undervalued.

Airtasker share price over 12 months.

SG Fleet Group

The fleet management company provided no earnings guidance during a 1Q update.

Morgan Stanley sees ongoing strength from customer wins, integration and new revenue opportunities and notes Fleet momentum with strong tender activity and the expectation for robust win rates.

The broker's Overweight rating and $3.40 target are maintained.

Consensus is Strong Buy.

Based on Morningstar’s fair value of $2.53 the stock appears to be undervalued.

SG Fleet share price over 12 months.


To the uninitiated, Megaport offers scalable bandwidth for public and private cloud connections, metro ethernet, and Data Centre backhaul as well as Internet Exchange Services.

Like a lot of lossmaking tech stocks, the company has been trending lower on the back of rising interest rates.

Last month Morgan Stanley initiated coverage with an Overweight rating after flagging the company has a sustainable competitive advantage and scalability to grow and become significantly more profitable.

While the broker has a target price of $10, both UBS and Citi are Buy rated on Megaport with target prices of $14.00.

Consensus on Megaport is Moderate Buy.

Based on Morningstar’s fair value of $12.12 the stock appears to be significantly undervalued.

Megaport's share price has been the victim of short selling which recently jumped to 11.81%.


Written By

Mark Story


Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. 

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