People often have discussions about how the value of a company relates to investors. These are good discussions to have, because often times it’s hard to tell how a company is valued because of growth and other factors. There are two companies that seem dramatically undervalued as well as two companies that appear overvalued — even if it’s not obvious.
Although some investors may not have heard of this company, it is believed to have developed Siri — however due to privacy, that information has not been released. Nuance Communications Inc. (NASDAQ:NUAN) provides voice dictation devices and virtually anything that can turn your voice into a command. With double-digit growth and trading at 11x the estimated earnings for the year ahead, it appears this company is dramatically undervalued.
Nuance operates in four divisions and has established devices for both consumer and mobile products. The company provides services to the likes of Mercedes Benz, Garmin Ltd. (NASDAQ:GRMN), and Bose. Aside from these major companies, many doctors are starting to use their products for patient dictation notes, and we have all heard their recordings that allow responses instead of an option of numbers. For instance: “To make a payment say, ‘make a payment.’ For information regarding your account say, ‘account information.'”
Google Inc (NASDAQ:GOOG) is likely the strongest competitor to Nuance in an industry that is evolving very rapidly. While Google is active in this area, Nuance doesn’t appear to have any serious competitors, which is good for investors.
After a $182 billion tax payer bail out, this next undervalued company is one that people love to hate. Many people are not willing to forgive American International Group, Inc. (NYSE:AIG) despite its asking for forgiveness and having released several ad campaigns thanking people. These have not been well received by the general public, but this post is about value — not how likable a company is.
The company is trading at around $40/share, while its book value is showing the stock worth approximately $69/share. What does this mean? If an investor receives a 10% return on equity (ROE), they will receive nearly a 20% annualized return. AIG recently sold an aircraft leasing division that actually hurt the book value of the company. In 2012, nearly $14 billion was spent in buying back shares. Even after turning the ship around, the stock is still cheap considering its tainted views by the public.