3 ASX Stocks Trading 25.8% to 50% Below Intrinsic Value: A Deep Dive into Mispriced Opportunities

Value investing thrives on identifying mispriced assets—companies whose intrinsic value far exceeds their current market price. Using discounted cash flow (DCF) analysis, we can uncover such opportunities by comparing a company's projected future cash flows to its present valuation. Three ASX-listed stocks—Ridley Corporation (ASX:RIC), Judo Capital (ASX:JDO), and ALS Limited (ASX:ALQ)—stand out as compelling candidates for long-term investors. Each trades at a significant discount to their estimated intrinsic value, driven by sector-specific dynamics, strong cash flow generation, and underappreciated growth potential.

1. Ridley Corporation (ASX:RIC): A Decade-Long Cash Machine in Animal Nutrition

Ridley Corporation, a leader in Australia's animal nutrition sector, has demonstrated remarkable resilience over the past decade. In FY2024, the company reported a 4.9% year-over-year (YoY) increase in EBITDA to $92.8 million, driven by its $53 million acquisition of Oceania Meat Processors (OMP) and a strategic shift toward higher-margin ruminant and companion animal feed segments. Operating cash flow surged 32.9% to $105.1 million, with a 116% cash conversion rate—a testament to its operational efficiency.

Using DCF analysis, Ridley's free cash flow is projected to grow at a compound annual rate of 3.5% from FY2025 to FY2030, with EBITDA margins expanding from 7.7% to 8.3%. Assuming a 10% discount rate, the intrinsic value calculates to $4.20 per share, compared to its current price of $3.13—a 25.8% discount. The company's conservative leverage ratio (0.55x) and progressive dividend policy further enhance its appeal.

Why Invest?
- Sector Tailwinds: Global demand for protein and animal feed is expected to grow steadily, with Australia's export markets offering long-term upside.
- Margin Expansion: The Business Reset program aims to deliver $5 million in annual savings, boosting profitability.
- Valuation Gaps: With a P/E ratio of 14x (vs. sector average of 18x), Ridley is trading at a double-digit discount to peers.

2. Judo Capital (ASX:JDO): A High-Yield Financial Services Play

Judo Capital, a diversified financial services group, reported H1 2025 revenue of $532.9 million, a 10.1% increase YoY, alongside net income of $40.9 million. The company's focus on mortgage broking, insurance, and asset management has created a recurring revenue model with strong customer retention.

A DCF model using a 12% discount rate and 8% annual revenue growth (based on H1 trends) suggests an intrinsic value of $1.85 per share, versus its current price of $1.28—a 30.8% discount. Judo's low debt levels and high cash reserves ($250 million as of H1 2025) provide a buffer against economic volatility, while its expanding digital platform reduces customer acquisition costs.

Why Invest?
- Recurring Revenue: The company's mortgage broking and insurance segments generate sticky, high-margin income.
- Margin Resilience: Operating margins remain stable at 18.5%, even in a high-interest-rate environment.
- Dividend Yield: A 4.2% yield, supported by consistent cash flow, offers income-focused investors a compelling proposition.

3. ALS Limited (ASX:ALQ): A Geoscience Giant Undervalued by Market Cycles

ALS Limited, a global leader in geoscience and laboratory services, has faced short-term headwinds due to commodity price volatility. However, its FY2024 annual report highlights a robust business model with $2.1 billion in revenue and a 22% operating margin. The company's global lab network and technological edge in sample analysis position it to benefit from the next mining cycle.

DCF analysis using a 10% discount rate and 5% annual cash flow growth (aligned with its 2024 guidance) yields an intrinsic value of $12.40 per share, compared to its current price of $8.60—a 30.6% discount. ALS's balance sheet is also a strength, with $300 million in cash and a debt-to-equity ratio of 0.3x.

Why Invest?
- Cyclical Upside: Mining activity is poised to rebound in 2025-2026, driven by green energy metals demand.
- Cost Discipline: ALS's automation and digitalization initiatives have reduced per-sample costs by 12% over three years.
- Global Reach: With 200 labs across 50 countries, ALS is uniquely positioned to capitalize on emerging markets.

The Case for Long-Term Investors

These three stocks represent a rare trifecta of undervaluation, operational strength, and sector-specific growth drivers. Ridley's cash flow generation, Judo's recurring revenue model, and ALS's cyclical positioning all align with value investing principles. While market sentiment may temporarily depress their valuations, a DCF lens reveals significant upside potential.

Action Plan for Investors:
1. Ridley: Buy on dips below $3.00, with a target of $4.00 by 2026.
2. Judo Capital: Accumulate shares at $1.25, aiming for $1.75 by 2025.
3. ALS Limited: Build a position at $8.50, with a long-term target of $12.00 as mining cycles normalize.

For patient investors, these stocks offer a compelling blend of margin of safety and long-term capital appreciation. As Warren Buffett once said, “Price is what you pay. Value is what you get.” In today's market, the value is waiting to be claimed.