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I've been keeping an eye on Japfa Ltd. (SGX:UD2) because I'm attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe UD2 has a lot to offer. Basically, it is a financially-healthy company with a a great history of performance, trading at a discount. Below is a brief commentary 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 Japfa here.
Undervalued with solid track record
UD2 delivered a triple-digit bottom-line expansion over the past couple of years, with its most recent earnings level surpassing its average level over the last five years. In addition to beating its historical values, UD2 also outperformed its industry, which delivered a growth of -3.0%. This paints a buoyant picture for the company. UD2 is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that UD2 manages its cash and cost levels well, which is an important determinant of the company’s health. Debt funding requires timely payments on interest to lenders. UD2’s earnings sufficiently covered its interest in the prior year, which indicates there’s low risk associated with the company not being able to meet these key expenses.
UD2's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of UD2's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the food industry, UD2 is also trading below its peers, relative to earnings generated. This supports the theory that UD2 is potentially underpriced.
Next Steps:
For Japfa, there are three fundamental factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for UD2’s future growth? Take a look at our free research report of analyst consensus for UD2’s outlook.
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Dividend Income vs Capital Gains: Does UD2 return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from UD2 as an investment.
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Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of UD2? 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.