Cash Flow Stocks Retail Investors May Be Missing In Australia

Central banks in Europe are still signalling possible rate hikes to contain inflation. That keeps pressure on broad equity valuations and makes reliable cash generation more valuable. When investors worry about the path of rates, stocks with strong cash flow support and discounts to estimated fair value can look appealing. This article highlights three stocks from the Undervalued Stocks Based On Cash Flows screener that fit that profile.

The stocks covered below are just a small sample, and the full screen surfaced 43 more companies with similarly compelling cash flow and valuation stories that are not included here. To identify and analyze the ideas that best fit your style, head straight into the Undervalued Stocks Based On Cash Flows screener.

Mesoblast (ASX:MSB)

Overview: Mesoblast is a Melbourne based biotechnology company focused on developing mesenchymal lineage cell therapies, with late stage candidates such as Remestemcel L and the MPC 150/300 programs aimed at severe inflammatory and cardiovascular diseases. These programs could support substantial future cash flows if commercialized successfully.

Operations: Mesoblast currently generates about $65 million in revenue from developing its cell technology platform for commercialization.

Market Cap: A$3.1 billion

Mesoblast attracts interest because its late stage cell therapy programs are closely linked to the cash flow potential that underpins its SWS DCF valuation. However, the stock is flagged as trading below that estimated fair value. The company already has Ryoncil on the market with reported product sales and is seeking wider use in conditions such as steroid refractory acute graft versus host disease. At the same time, pivotal Phase III trials in chronic low back pain and heart failure target much larger patient pools and possible future revenue streams. Investors need to weigh this against current losses, ongoing cash burn and reliance on external funding. For those comfortable with biotechnology risk, Mesoblast provides a focused way to gain exposure to late stage assets with sizeable projected markets.

Late stage cell therapies, an existing product and an SWS DCF that suggests Mesoblast may trade below estimated fair value create a story that many investors have only half finished. To see how those projected markets, current cash burn and funding needs fit together, review the DCF valuation analysis for Mesoblast and decide what the market might be missing next.

Telix Pharmaceuticals (ASX:TLX)

Overview: Telix Pharmaceuticals is a commercial stage radiopharmaceutical company that develops and sells precision imaging agents and targeted cancer therapies, with Illuccix and Gozellix already helping doctors locate prostate tumours and late stage candidates like TLX591 aimed at treating advanced disease. This commercial and late stage radiopharma portfolio links Telix directly to the Undervalued Stocks Based On Cash Flows theme because it ties today’s revenue to products that could support future cash generation if trials and approvals progress as planned.

Operations: Telix generates most of its revenue from the Precision Medicine segment at about $704 million, supported by around $277 million from Manufacturing Solutions, with the United States accounting for roughly $872 million of reported sales.

Market Cap: A$5.3 billion

Investors looking at Telix Pharmaceuticals see a mix of an existing cash generating imaging business and a late stage therapeutic pipeline that is linked to the Undervalued Stocks Based On Cash Flows theme. Illuccix and Gozellix support current earnings, while Phase 3 programs such as TLX591 in advanced prostate cancer and TLX250 in kidney cancer add potential future revenue streams that sit behind the SWS DCF valuation signal. The stock currently trades below that estimated cash flow value and carries risks including heavy R&D investment, debt funded expansion and clinical or regulatory setbacks that could delay those future cash flows.

Telix Pharmaceuticals is already generating cash from imaging while its late stage therapies could reshape the story. To see how current revenue, pipeline progress and risks stack up, review the analysis report for Telix Pharmaceuticals

WiseTech Global (ASX:WTC)

Overview: WiseTech Global develops cloud based software that helps freight forwarders, customs brokers and logistics providers run complex global supply chains on a single CargoWise platform. The company generates recurring subscription and transaction based revenues that are central to the Undervalued Stocks Based On Cash Flows screener theme. The newer e2open segment broadens WiseTech’s reach across the wider supply chain, while CargoWise remains the key driver of the cash flows used in SWS’s DCF valuation work.

Operations: WiseTech Global reports revenue across the Americas at about US$451 million, Asia Pacific at roughly US$255 million and Europe, the Middle East and Africa at around US$364 million.

Market Cap: A$13.6 billion

WiseTech Global attracts interest because CargoWise produces recurring software cash flows that underpin SWS’s DCF fair value estimate. The stock is flagged as trading about 29.5% below that level. Earnings are forecast to grow strongly and recent results show revenue at scale, but investors also need to weigh a drop in net profit margin from 27.3% to 15.2%, weaker recent earnings and a large one off loss of US$75.6 million. The e2open acquisition, higher debt and an ACCC investigation add complexity around execution and cash flow quality. For investors who want exposure to global supply chain software, the mix of recurring revenue strength and elevated risk may be worth a closer look.

WiseTech Global’s recurring revenue story and the e2open acquisition are pulling in different directions for investors. Get the full picture with the analysis report for WiseTech Global and see what the ACCC investigation could really mean.

Seeking Fresh Alternatives Beyond These Picks

Some stocks can move from quiet to breakout while most investors are still looking the other way. Consider these fresh ideas before momentum is widely recognized and pricing adjusts.

• Spot companies building real utility in digital assets by reviewing the curated 21 cryptocurrency and blockchain stocks before prices change and the best risk reward balance shifts.
• Track cash rich operators with steady footing through the focused list of solid balance sheet and fundamentals (20 results) while balance sheet strength remains less widely followed.
• Follow infrastructure-related opportunities by scanning the hand picked 38 power grid technology and infrastructure stocks and assessing potential positions ahead of broader interest in grid upgrades.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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