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As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of STAR Pharmaceutical Limited (SGX:AYL), it is a company that has been able to sustain great financial health, trading at an attractive share price. In the following section, I expand a bit more on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on STAR Pharmaceutical here.
Flawless balance sheet and undervalued
AYL's strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. Looking at AYL's capital structure, the company has no debt on its balance sheet. This means it is running its business only on equity capital funding, which is typically normal for a small-cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future. AYL is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. Investors have the opportunity to buy into the stock to reap capital gains, if AYL's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Also, relative to the rest of its peers with similar levels of earnings, AYL's share price is trading below the group's average. This supports the theory that AYL is potentially underpriced.
Next Steps:
For STAR Pharmaceutical, I've compiled three pertinent factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for AYL’s future growth? Take a look at our free research report of analyst consensus for AYL’s outlook.
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Historical Performance: What has AYL's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of AYL? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.