The FTSE250 it has endured a hard March, but is showing some signs in early April that the worst of the downward move may be over. As the dust begins to settle, some companies seem attractive, but others give me red flags.

The distinction between them is very vital! Here’s one stock that I think is undervalued, but I’m very cautious about the other one.

Building for the future

Let’s start with a company that I consider undervalued: Travis Perkins (LSE:TPK). It fell 18% last month but is up 11% over the broader year.

The highlight of last month was primarily the publication of the company’s full-year results. It showed that trading conditions remain hard, with tender housebuilding activity limiting demand for construction materials. Revenue fell 0.9% and adjusted operating profit fell 12.5%, with the group reporting a loss of £97m as impairment charges and restructuring costs increased.

While the residential business remains a risk going forward, I think it may just be a decline in the share price. First, the balance sheet has improved significantly. For the first time in decades, the company achieved a net cash position, giving it resilience and flexibility. Free cash flow also turned out to be stronger than expected, which is much more vital than accounting losses in the long run.

Moreover, we should not forget that this is still a highly cyclical activity. If the conflict in the Middle East ends and UK interest rates fall later this year, consumers should feel more confident, which will support revive the construction and housing markets. This should then translate into a significant rebound in volumes and investor sentiment.

Therefore, I believe this stock is undervalued given where it could be trading by the end of the year, and I believe investors could consider purchasing it.

There are no signs of improvement yet

On the other hand, I still stay away from recruitment companies Hay (LSE: MA). A month ago I wrote about a company that was trading at its lowest level in several decades. However, I decided it wasn’t the right time to buy, which was a good decision as the company’s shares are down 17% over the past month. Last year it was down 59%.

Right now, the job market is tender for Hayes. Economic uncertainty across Europe, particularly in key regions such as Germany and the UK, is making employment hard. And when hiring slows down, recruiters like Hays feel it almost immediately.

However, it is not just about waiting for the labor market to recover. Hays is struggling on other fronts – in tardy February, news broke that its CEO would step down amid penniless financial results. The company even cut its dividend by 84%, which isn’t a sign that all is well.

It is true that Hays has not lost its relevance. It remains one of the largest recruitment companies in Europe. It has a forceful global footprint and deep cross-industry relationships. When employment finally recovers, I expect stocks will rebound. However, from my current situation, I still believe there is still room for decline before I want to buy.