These are the ASX 200's cheapest stocks with the most upside

The cheapest ASX 200 stocks with the most upside, according to analysts, might come with a few strings attached. As you sift through the below list of stocks, you'll begin to realise why analysts are pricing in so much upside (and why a few things might need to happen before they can re-rate).

The Cheap Stocks with the Most Upside

'Target price' is an aggregate of all broker target prices under Refinitiv's database. Data as at Friday, 29 September 2023 close. (Table: Market Index | Source: Refinitiv)

Sovereign risk: Companies that operate projects in risky jurisdictions tend to trade at a substantial discount to ones based in safe jurisdictions. West African Resources says it expects to produce 210-230,000 ounces of gold in 2023, which is comparable to a peer such as Ramelius Resources, which mined 281,000 ounces in FY23. The only difference is that Ramelius trades at a $1.6bn market cap versus WAF's $800m market cap. WAF shares have been trending lower for most of this year, down 33% year-to-date and -7.8% in the past month. While analysts might have a bullish price target, you have to wonder, is the path of least resistance to bet on a turnaround for African miners like WAF or to avoid them entirely?

West African Resources 12-month price chart (Source: Market Index)

Qantas shares battered but 'valuation remains attractive': Qantas shares have sold off for some fairly well-documented reasons. But analysts continue to remain bullish due to valuation reasons. The company's recent trading update noted:

• An incremental investment of $80 million in customer experience

• 1H24 fuel bill is forecast to be $200m higher than the prior guidance along with a further $50m foreign exchange headwind

• Overall travel demand remains strong with 1Q24 trading conditions consistent with 4Q23 levels

The questions is: Does the market care about Qantas' compelling valuation at the moment? Has the brand suffered too much damage alongside rising headwinds such as fuel prices and rising interest rates?

Qantas 12-month price chart (Source: Market Index)

Citi says "things could get tougher before they get better" for Elders: Shares in Elders have been on a downward spiral due to a myriad of headwinds such as moderating livestock prices, higher input costs and management changes. Back in August, Citi retained a Sell rating for the stock with a $6.00 target price (down from $6.85), with the view that "we see heightened risk of challenges faced by Rural Products and Agency Services lingering through FY24 before conditions improve."

Elders 12-month price chart (Source: Market Index)

The bottom line: The stocks on the above list are down an average 4% in the past twelve months. Analysts have remained bullish on names like West African Resources, Perseus Mining and Elders for quite some time but they've yet to see any upside. Things might make sense from a valuation perspective, but these companies have a lot to prove.