Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on China Literature Limited (HKG:772) due to its excellent fundamentals in more than one area. 772 is a financially-sound company with a great track record and an optimistic growth outlook. Below, I’ve touched on some key aspects you should know on a high level. If you’re interested in understanding beyond my broad commentary, take a look at the report on China Literature here.
High growth potential with excellent balance sheet
772 is an attractive stock for growth-seeking investors, with an expected earnings growth of 43% in the upcoming year. Earnings growth is paired with an eye-catching top-line trajectory also doubling over the same period, which indicates a high-quality bottom-line expansion, as opposed to those driven by unsustainable cost-cutting activities. 772 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. Not only did 772 outperformed its past performance, its growth also exceeded the Media industry expansion, which generated a -10% earnings growth. This paints a buoyant picture for the company.
772’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 a key determinant of the company’s health. 772’s has produced operating cash levels of 2.17x total debt over the past year, which implies that 772’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
For China Literature, there are three important aspects you should look at:
- Valuation: What is 772 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 772 is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does 772 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 772 as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 772? 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 firstname.lastname@example.org. 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.