In This Article:
Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Steppe Cement Ltd. (LON:STCM) due to its excellent fundamentals in more than one area. STCM is a financially-sound company with 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 Steppe Cement here.
Flawless balance sheet and undervalued
In the past couple of years, STCM has ramped up its bottom line by over 100%, with its latest earnings level surpassing its average level over the last five years. In addition to beating its historical values, STCM also outperformed its industry, which delivered a growth of 33%. This paints a buoyant picture for the company. STCM'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 indicates that STCM has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. STCM seems to have put its debt to good use, generating operating cash levels of 1.57x 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.
STCM's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts' consensus forecast growth be correct. Also, relative to the rest of its peers with similar levels of earnings, STCM's share price is trading below the group's average. This further reaffirms that STCM is potentially undervalued.
Next Steps:
For Steppe Cement, I've put together three fundamental factors you should further research:
-
Future Outlook: What are well-informed industry analysts predicting for STCM’s future growth? Take a look at our free research report of analyst consensus for STCM’s outlook.
-
Dividend Income vs Capital Gains: Does STCM 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 STCM as an investment.
-
Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of STCM? 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.