With global sovereign bond yields recently trading near multi month highs, investors face higher discount rates that can pressure equity valuations and reveal mispricing. That backdrop can turn undervalued cash flow stories into especially interesting hunting ground for patient capital. This article highlights three stocks from the Undervalued Stocks Based On Cash Flows screener that look cheap against their SWS DCF fair values and explains what makes each worth a closer look.

The three stocks below are just a starting sample, since the full screen surfaced another 144 companies with equally compelling cash flow stories that are not covered here. To identify and analyze your own highest conviction ideas from that broader universe, head straight to the Undervalued Stocks Based On Cash Flows screener.

Keysight Technologies (KEYS)

Overview: Keysight Technologies provides electronic test and measurement instruments and software that help customers design, validate and maintain complex wireless, data center, semiconductor and automotive systems, generating recurring cash flows from hardware, software licenses and high margin support like KeysightCare. The company also sells services such as installation, training and consulting, along with network test, security and device vulnerability analysis solutions that add further recurring revenue potential.

Market Cap: US$58.3b

Investors interested in cash flow driven value may pay close attention to Keysight Technologies. Its core test and measurement franchise ties hardware, software and KeysightCare support into repeat business across AI heavy data centers, semiconductors and aerospace or defense. Some analysts see room for higher margins and strong returns on equity over the next few years. At the same time, high expectations, a premium P/E and ongoing insider selling mean the bar is set high. Any slowdown in AI infrastructure spending, tougher competition in optical or Ethernet test, or heavier R&D needs could pressure that earnings path. The key question is whether the current discount to SWS DCF fair value compensates investors for those risks.

Keysight Technologies sits at the crossroads of premium expectations and a cash rich recurring business. Before you assume the current P/E tells the full story, review the 4 key rewards and 1 important warning sign

Build your own undervalued cash flow shortlist

Keysight Technologies and the other two stocks in this article all came from a single Simply Wall St screen, but the real value is in tailoring the filters to your own approach. Use our flexible Screener to combine valuation, cash flow, quality and risk metrics, or start with any of our curated Investing Ideas for ready made shortlists that fit different styles.

MercadoLibre (MELI)

Overview: MercadoLibre is a leading Latin American e-commerce and fintech company that runs the Mercado Libre Marketplace and Mercado Pago, where the payments, transaction fees, interest income from Mercado Fondo and lending through Mercado Crédito create recurring cash flows that link directly to the Undervalued Stocks Based On Cash Flows theme, alongside meaningful contributions from logistics, classifieds and advertising.

Operations: MercadoLibre generates about US$35.2b of revenue from Internet Software & Services, primarily across Brazil (US$18.9b), Mexico (US$8.1b), Argentina (US$6.6b) and other countries (US$1.6b).

Market Cap: US$90.2b

MercadoLibre gives you a combination of a dominant e-commerce platform and a fast scaling fintech engine in Mercado Pago, where recurring cash flows from payments, fees, interest income and credit sit at the heart of the DCF story. Simply Wall St’s fair value estimate is about 45% above the recent price, yet the stock screens as expensive on a P/E basis. This means the opportunity hinges on how those cash flows mature rather than on the multiple alone. Earnings and revenue are both forecast to grow strongly, but this is funded with a high debt load instead of customer deposits, and profit margins have moved down from last year. If you want to understand whether the credit book is a cash machine or a cash drain, MercadoLibre deserves a closer look.

MercadoLibre’s cash engine from payments, fees and credit is accelerating while headline P/E debates grab most of the attention. Get the fuller picture with the 2 key rewards and 2 important warning signs that could reshape how you view the risk reward trade off on this stock.

Clear Secure (YOU)

Overview: Clear Secure runs the CLEAR identity platform that uses biometrics and subscriptions like CLEAR Plus, TSA PreCheck enrollment and CLEAR1 B2B services to give consumers and enterprises faster, verified access at airports and other locations. This creates recurring, fee based cash flows that align closely with the Undervalued Stocks Based On Cash Flows screener theme.

Operations: Clear Secure generates about US$1.0b of revenue from secure biometric identity verification, almost entirely in the United States.

Market Cap: US$6.0b

Clear Secure may be worth a closer look for investors seeking exposure to recurring cash flows backed by an expanding identity network rather than only one off travel volumes. CLEAR Plus subscriptions, TSA PreCheck enrollments and CLEAR1 enterprise contracts all contribute to bookings and free cash flow, and recent Q2 updates indicate changes in margins and a revised full year cash flow outlook. The company also pays a dividend, which reflects management’s stance on cash generation. On the other hand, profit margins have declined compared to last year, insider selling has increased, and new leadership and credit card partnership terms introduce execution risk. The key question is whether the current discount to SWS DCF fair value appropriately reflects those issues or overstates them.

Clear Secure’s expanding identity network and dividend policy may be masking a very different cash flow story than the headline profit trend suggests. Read the analysis report for Clear Secure to see what the recent margin shifts might really mean for investors.

Seeking Fresh Alternatives Before They Fly

Fresh breakouts and quiet momentum often appear in focused screens before the broader market takes notice. Consider using that information while it is still timely and before prices change.

• Spot stronger income ideas by scanning companies in the 12 dividend fortresses that aim to balance high yields with balance sheets designed to support payouts through different cycles.
• Look for potential growth opportunities by reviewing the curated 20 high quality undiscovered gems where solid fundamentals and under the radar stories appear before wider attention arrives.
• Evaluate infrastructure-related opportunities by checking the focused 39 power grid technology and infrastructure stocks that tracks companies connected to grid upgrades, reliability projects and long term electrification themes.

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.