Among a sea of growing companies, three undervalued stocks with potential have floated to the surface. Despite their undervaluation, these equities offer investors attractive opportunities to augment their portfolios with assets expected to rise in value.
The first one sticks out due to its remarkable financial results and unwavering dedication to innovation. Although shipments have fluctuated recently, the business expects a significant shipment increase for the following year.
The second one employs a calculated approach to financial restructuring to strengthen its market share in Latin America. The firm attains financial flexibility by renegotiating debt arrangements and extending payment periods, opening up prospects for sustainable growth.
The third one demonstrates tenacity in the face of inflationary pressures, skillfully controlling expenses while investing substantial money in exploratory endeavors. The company is a profitable avenue for capital appreciation, concentrating on the exploration and production of oil and gas.
Learn how these three equities, taken as a whole, promise more than the average financial asset due to unrealized potential.
ACM Research (ACMR)
Operating margins for ACM Research (NASDAQ:ACMR) were 21% and 22% for Q4 and 2023, respectively. This demonstrates the company’s continued solid financial performance and bottom line. The company expects a notable increase in shipments for Q1 2024 despite a decrease in shipments during Q4 2023. Overall, projected shipments could surpass revenue growth for the whole year.
On the other hand, developing new products demonstrates the direct relationship between ACM Research’s constant innovation efforts and revenue growth. These include the semi-critical CO2 dry cleaning tool, the high-temperature sulfuric peroxide mix (SPM) single wafer cleaning tool, and the bevel etch cleaning tool.
Moreover, ACM Research’s operating margins increased from 17.2% in 2022 to 22.1% in 2023, indicating increased profitability and operational efficiency. In summary, strong operating margins attest to ACM Research’s capacity to control expenses and profit. Thanks to this financial approach, ACMR has overcome supply chain limitations compared to other undervalued stocks with potential similar to itself.
Zenvia (ZENV)
Recent agreements to restructure its financial liabilities highlight Zenvia’s (NASDAQ:ZENV) strategic attempts to overcome its funding deficit. The agreements comprise extensions of bank short-term debt, amounting to around 100 million Brazilian reais (BRL). The 36-month extended payment term includes a 6-month grace period and 30 monthly installments, with the ultimate maturity occurring in December 2026. Thus, this extension gives Zenvia more time and financial flexibility to fulfill its commitments.
In addition, renegotiating earnouts further reduces the immediate financial burden. Specifically, Movidesk and D1, two companies Zenvia took on debt to acquire, have had their earnouts adjusted. Movidesk’s total debt earnout stands at around 207 million BRL, and D1’s is around 20 million BRL. Thanks to negotiations, the new maturation dates for these earnouts are December 2026 and December 2028 respectively. The extended payment terms—60 months for Movidesk’s earnout and 36 months for D1’s—effectively stretch the financial commitments over a more manageable timetable.
Finally, after considering the revised EBITDA projection and the conversion of Movidesk’s earnout into equity, Zenvia’s pro-forma debt could be around 2.0x by the end of 2024. In short, with a good debt-to-EBITDA ratio and a balanced leverage ratio, Zenvia may achieve long-term growth and expansion in the Latin American market.
Gran Tierra (GTE)
Despite inflationary pressures, Gran Tierra (NYSEAMERICAN:GTE) has proven its cost management strategies effective.
However, even with cost control efforts, operating expenditures per barrel grew by 8% in 2023. This is mostly due to maintenance activities. Gran Tierra somewhat offset the decline in net oil sales in 2023 by increasing sales volumes and reducing transportation discounts.
Meanwhile, Gran Tierra Energy has the potential for long-term growth because of its strategic investments and exploration efforts. The business has allocated 40% and 45% of its 2024 capital program to high-impact exploratory projects. These involve boring exploratory wells in Ecuador and Colombia to find new deposits and promote a steady increase in output. Gran Tierra’s year-end reserves were the largest in the organization’s history, thanks to large acquisitions in every reserve category.
Finally, Gran Tierra demonstrated effective capital allocation and financial discipline in 2023 by producing $58 million in free cash flow. In 2023, the business paid down $6.9 million in debt and bought back shares, acquiring around 6.8% of all outstanding shares.
As of this writing, Yiannis Zourmpanos held a long position in ACMR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
