Three Undervalued Stocks Trading Up to 45.7% Below Intrinsic Value

In the ever-evolving landscape of value investing, identifying companies trading at a significant discount to their intrinsic value requires a blend of rigorous financial analysis and strategic foresight. Using discounted cash flow (DCF) models and growth projections, three stocks—CompoSecure (CMPO), Granite Construction (GVA), and Similarweb (SMWB)—stand out as compelling opportunities. Each exhibits strong future cash flow potential, strategic momentum, and market mispricings that suggest long-term upside for patient investors.

1. CompoSecure (CMPO): Bridging Traditional Finance and Web3

CompoSecure, a leader in secure payment solutions, has emerged as a critical player in the convergence of traditional finance and the Web3 ecosystem. Its Q2 2025 results underscored robust growth: non-GAAP net sales rose 10% year-over-year to $119.6 million, driven by partnerships with institutions like Chase, Coinbase, and Gemini. The launch of the Coinbase One Card—the first crypto card on the American Express network—highlights its ability to innovate in high-growth niches.

DCF Analysis and Intrinsic Value
CompoSecure's intrinsic value is bolstered by its 10.5% CAGR in non-GAAP net sales and expanding gross margins (57.5% in Q2 2025 vs. 51.6% in Q2 2024). With full-year 2025 guidance of $455 million in sales and $158 million in pro forma adjusted EBITDA, the company's free cash flow is projected to grow at a double-digit rate. Applying a WACC of 9.5% and a terminal growth rate of 3%, the DCF model suggests an intrinsic value of $18.50 per share, a 45.7% premium to its current price of $12.70.

Strategic Catalysts
- Arculus Platform Expansion: Already contributing positively in Q1 2025, this platform is expected to drive recurring revenue from crypto and fintech clients.
- Debt Reduction: Net debt leverage has dropped to 0.66x, providing flexibility for R&D and M&A.
- Market Tailwinds: The global digital wallet and crypto card market is projected to grow at 18% CAGR through 2030, positioning CompoSecure to capture significant market share.

2. Granite Construction (GVA): Infrastructure's Steady Giant

Granite Construction, a vertically integrated infrastructure and materials company, has capitalized on the Infrastructure Investment and Jobs Act (IIJA) and strategic acquisitions. Q2 2025 results showed 4% revenue growth to $1.13 billion, with adjusted EBITDA margins expanding to 11.25–12.25%. The recent acquisitions of Warren Paving and Papich Construction added $150 million in revenue and 60 basis points of margin accretion.

DCF Analysis and Intrinsic Value
Granite's intrinsic value is supported by its 6–8% organic CAGR through 2027 and a conservative WACC of 9.44%. With $483 million in cash and a net leverage ratio of <2.5x, the company's balance sheet is a fortress. Projecting 12.5–14.5% EBITDA margins by 2027 and a 3.5% terminal growth rate, the DCF model yields an intrinsic value of $115 per share, a 32.4% discount to its current price of $169.

Strategic Catalysts
- Vertical Integration: Controlling the supply chain from aggregates to construction services ensures margin resilience.
- Geographic Expansion: Acquisitions in the Gulf Coast and Central California enhance market penetration.
- IIJA Tailwinds: With only 50% of IIJA funds spent as of 2025, Granite is positioned to benefit from a multi-year spending surge.

3. Similarweb (SMWB): Data-Driven AI Growth

Similarweb, a digital analytics platform, is navigating a transition from a loss-making entity to a cash-generative business. Q2 2025 revenue grew 17% to $71 million, with non-GAAP operating profit of $2.4 million. While GAAP losses persist, the company's 26% year-over-year increase in remaining performance obligations (RPO) to $273.8 million signals strong future cash flow visibility.

DCF Analysis and Intrinsic Value
Despite GAAP losses, Similarweb's non-GAAP metrics and Gen AI/LLM training revenue (8% of Q2 sales) justify a higher growth rate. Applying a WACC of 10.75% and a 4% terminal growth rate, the DCF model estimates an intrinsic value of $14.20 per share, a 56.3% premium to its current price of $9.13.

Strategic Catalysts
- AI/LLM Revenue: This segment is growing at 50%+ CAGR, with clients like Microsoft and Google leveraging Similarweb's data for model training.
- Customer Retention: A 108% dollar-based net retention rate for high-value customers indicates product stickiness.
- Margin Expansion: Normalized free cash flow of $3.8 million in Q2 2025 suggests improving profitability.

Why These Stocks Are Mispriced

1. CompoSecure: The market underestimates its role in the crypto-card revolution and its margin expansion potential.
2. Granite Construction: Investors are overcautious about infrastructure spending, despite IIJA's long runway.
3. Similarweb: GAAP losses overshadow its non-GAAP profitability and AI-driven growth.

Investment Thesis

For long-term investors, these stocks represent high-conviction opportunities where fundamentals outpace current valuations. CompoSecure and Granite offer tangible cash flow growth and defensive balance sheets, while Similarweb's AI pivot could unlock significant upside.

Entry Points and Risk Management
- CompoSecure: Buy on dips below $14, with a target of $18.50.
- Granite Construction: Accumulate at < $130, with a long-term target of $115.
- Similarweb: Position at < $10, with a 12–18-month target of $14.

In a market obsessed with short-term volatility, these three stocks exemplify the power of value-driven growth investing. By focusing on durable cash flows, strategic execution, and macro tailwinds, investors can capitalize on mispricings that history has shown to compound over time.