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Israel is an interesting market. The country is small, yet it maintains a high level of visibility. Israel was upgraded by MSCI as a developed nation, from its former emerging status, last year. Israel is also known for producing many high tech products and companies, and the nation boasts more companies being listed on NASDAQ than any country except the United States and Canada.

Many value investors believe that investing in businesses when they are trading below book value provides the opportunity for appreciation with some margin of safety. The idea of purchasing viable businesses for less than the believed market value of their net underlying assets has certain logic to it.

Book value is the value of a company's total assets, less its liabilities. Some companies fall below book value because of a poor economic outlook, problems with business scale or uncertainty over profit growth and/or debt servicing. Additionally, some companies may value their assets at above appropriate valuations, creating a low but inaccurate price to book value.

Here, I screened the market for Israeli companies with valuations of at least $50 million. Amongst them, I looked for those with trailing earnings (income) that have a current price to price to book value (P/B) of under 1. Below are the results.

Symbol

Company

Industry

Market Cap (U.S. Millions)

P/E

P/B

ALVR

Alvarion Ltd.

Wireless Communications

$70.72

N/A

0.7

EMITF

Elbit Imaging Ltd.

Property Management

$168.10

4.65

0.73

FORTY

Formula Systems (1985) Ltd.

Business Software & Services

$229.78

12.4

0.64

GILT

Gilat Satellite Networks Ltd.

Communication Equipment

$183.28

6.24

0.69

NSTC

Ness Technologies Inc.

Information Technology Services

$289.86

34.55

0.81

Book value, as explained above, can sometimes look deceptively undervalued when a company is susceptible to significant risk, or where a company's underlying assets are overvalued and apt for re-evaluation. It may also mean that other investors and/or the market generally is of the opinion that the business model is weak, in decline, corrupt or somehow otherwise a risky place to place an investment.

Disclaimer: This article should not be construed as personalized investment advice as it does not take into account your specific situation or objectives.

Source: 5 Israeli Equities Trading Below Book Value