As huge American brands such as The Home Depot, Inc. (NYSE:HD), Johnson & Johnson (NYSE:JNJ), and Wal-Mart Stores, Inc. (NYSE:WMT) hit all time highs, bears will once again begin to chime in, wailing that the market is over valued. Those people are incorrectly bidding up some of these huge brands. Well, I might not feel comfortable paying 30 times earnings for some hot growth companies; I still feel that there is value in the broader market. I will lay out three companies that I consider are under valued and trade below $10.
Two tickets to paradise
The first company we are going to talk about is Hawaiian Holdings, Inc. (NASDAQ:HA). Hawaiian Holdings, Inc. (NASDAQ:HA), which operates through its subsidiary Hawaiian Airlines, is a regional airline that, as your probably guessed, offers daily routes between Hawaii and major cities along the west coast plus NYC. The company also offers a few scheduled flights to Pacific countries such as Japan, The Philippines, and Australia.
For some reason, people are still bearish on airlines. Although this may be a heavily regulated industry that is easily crippled by fuel costs, I feel that this provides an opportunity for great companies to stand out. It also helps that Hawaiian Holdings, Inc. (NASDAQ:HA) operates in such a niche environment.
From a fundamental standpoint, Hawaiian Holdings, Inc. (NASDAQ:HA) fits the model of an under valued company. The company currently trades at 5.69 times trailing twelve months’ earnings and at 0.15 times sales. The company has traded down from its 52-week high of $7.20 and sports $7.89 per share in cash. Hawaiian Airlines is positioning itself for growth. The company plans to purchase 16 Airbus A321neo aircrafts and is also in the process of hiring 1,000 employees to support the expansion. Hawaiian Holdings, Inc. (NASDAQ:HA) is also planning to establish new routes to Mainland China from Honolulu.
Global real estate
Another company under $10 is one that will most likely not be on anyone’s radar. The company is Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN). Why worry about the U.S. housing rebound when you can capitalize on the expansion of the Chinese middle class. Xinyuan develops residential real estate properties for middle-income consumers in Tier II cities in China. Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) focuses on pre-selling all of its developments. This business model significantly decreases debt requirements and locks in cash flow. Xinyuan recently purchased three properties in the U.S. as it looks to expand operations outside of China.
Once again, the fundamentals show the company to be trading at a tremendous discount. Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) currently trades at just 2 times trailing twelve months earnings and at just 43% of book value. The company also has a free cash flow yield (percentage of revenue available to return to shareholders) of 32%. As you wait for price appreciation, you will be rewarded with a nice dividend. Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) currently has a 3.80% dividend yield with a very low 5% payout ratio.