3 ASX Stocks Trading 25.8% to 50% Below Their Fair Value in August 2025

In a bearish market environment, where sentiment is fragile and volatility reigns, value investors are often rewarded by identifying companies trading at a significant discount to their intrinsic worth. As of August 2025, three ASX-listed stocks—ALS Ltd (ASX:ALS), Judo Capital Holdings (ASX:JDO), and Ridley Corporation (ASX:RIC)—stand out as compelling candidates. These companies are trading 25.8% to 50% below analyst-estimated fair values, offering entry points for investors willing to navigate elevated debt and modest profitability in pursuit of long-term growth.

1. ALS Ltd (ASX:ALS): A Deep-Value Play in the Mining Sector

ALS Ltd, a global leader in mineral exploration and analytical services, is trading at AU$18.06, a 32.6% discount to its estimated fair value of AU$27.50 (based on a discounted cash flow model). Despite its undervaluation, the stock's 36.7x P/E ratio—well above the 20.5x industry average—raises questions about its relative cost. However, this discrepancy highlights a key opportunity: ALS's intrinsic value is being overlooked by a market fixated on short-term multiples.

The company's AU$256.20 million in earnings and AU$9.38 billion market cap underscore its scale and resilience. While its high P/E ratio suggests overvaluation on a relative basis, the DCF model's 32.6% discount implies strong cash flow potential and undervalued assets. For value investors, ALS represents a classic “buy the business, not the stock” scenario.

Risks to Consider: ALS's elevated P/E ratio and lack of immediate profitability (it operates in a capital-intensive sector) mean investors must tolerate short-term volatility. However, its strategic expansion into high-growth markets and robust cash flow generation could justify the discount over time.

2. Judo Capital Holdings (ASX:JDO): A High-Growth Bank at a Bargain Price

Judo Capital, a niche lender focused on small and medium-sized businesses, is trading at AU$1.56–AU$1.64, a 20.7% discount to its fair value of AU$2.07. Analysts project a 22% upside to AU$2.00, with a 12-month consensus target reflecting confidence in its earnings trajectory.

The company's 24.8% annual earnings growth—far outpacing the Australian market average—signals strong demand for its services. However, its 29.31x P/E ratio (vs. 10.2x for global banks) and 4.09% ROE highlight structural weaknesses. Judo's high debt-to-free cash flow ratio (-1.78) and low ROE suggest inefficiencies in capital allocation, but its growth potential and undervaluation create a compelling risk-reward profile.

Why Invest Now?: Judo's focus on SMEs—a sector poised for recovery post-economic downturn—positions it to capitalize on increased borrowing demand. While its valuation metrics are unattractive, the 24.8% earnings growth forecast and 22% upside from analyst targets make it a speculative but strategic play.

3. Ridley Corporation (ASX:RIC): A 49% Undervalued Food Sector Giant

Ridley, a leader in animal nutrition and feed ingredients, is trading at AU$2.90–AU$3.01, a 49% discount to its fair value of AU$5.91. This is the most significant undervaluation among the three, driven by a 26.8x P/E ratio (vs. 20.1x industry average) and a 20.7% annual revenue growth forecast.

The company's AU$175 million in equity and debt financing underscores its commitment to expanding its animal nutrition segments, a sector with long-term demand driven by global food security concerns. Despite a 14.4% ROE—modest but better than Judo's—Ridley's cash flow growth and technical indicators (projecting a 10.28% rise over three months) suggest a favorable short- to medium-term outlook.

Key Risks: Ridley's marginal overvaluation on a PE basis and modest ROE require careful monitoring. However, its strong revenue growth and strategic focus on high-margin animal nutrition products could drive re-rating as the market recognizes its intrinsic value.

The Case for Value Investing in a Bearish Market

The current market correction has created opportunities for disciplined investors to acquire high-quality assets at discounted prices. ALS, Judo Capital, and Ridley each offer unique advantages:
- ALS combines deep-value potential with a robust earnings base.
- Judo Capital leverages high-growth SME lending at a bargain price.
- Ridley provides a 49% discount to fair value, supported by strong cash flow and sector tailwinds.

While all three face risks—elevated debt, low ROE, or valuation multiples—these are mitigated by their growth trajectories and undervaluation. For investors with a long-term horizon, these stocks represent a rare chance to capitalize on market pessimism.

Conclusion: Buy the Discount, Not the Noise

In a bearish market, the key to success lies in separating signal from noise. ALS, Judo Capital, and Ridley are trading at significant discounts to their intrinsic values, offering entry points for investors who can tolerate short-term volatility. While their risks are real, the potential rewards—driven by strong cash flow, strategic expansion, and sector-specific growth—are substantial.

For those willing to adopt a value-investing mindset, these three ASX stocks present a compelling case to build a diversified portfolio that balances risk and reward in uncertain times. As Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” August 2025 may be the moment to act.