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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 Lonking Holdings Limited (HKG:3339), it is a financially-sound company with a a great history of performance, trading at a discount. 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 Lonking Holdings here.
Flawless balance sheet, undervalued and pays a dividend
In the previous year, 3339 has ramped up its bottom line by 65%, with its latest earnings level surpassing its average level over the last five years. Not only did 3339 outperformed its past performance, its growth also exceeded the Machinery industry expansion, which generated a 18% earnings growth. This is what investors like to see! 3339’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that 3339 has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. 3339 seems to have put its debt to good use, generating operating cash levels of 0.59x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows.
3339 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 3339’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the machinery industry, 3339 is also trading below its peers, relative to earnings generated. This further reaffirms that 3339 is potentially undervalued.
Next Steps:
For Lonking Holdings, I’ve compiled three key aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for 3339’s future growth? Take a look at our free research report of analyst consensus for 3339’s outlook.
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Dividend Income vs Capital Gains: Does 3339 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 3339 as an investment.
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Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 3339? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.