Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on China Oriental Group Company Limited (HKG:581) due to its excellent fundamentals in more than one area. 581 is a financially-healthy company with a great track record of performance, trading at a great value. 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, read the full report on China Oriental Group here.
Flawless balance sheet, undervalued and pays a dividend
581 delivered a satisfying double-digit returns of 27% in the most recent year. Not surprisingly, 581 outperformed its industry which returned 9.0%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. 581's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that 581 has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. 581 seems to have put its debt to good use, generating operating cash levels of 3.13x 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.
581's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of 581's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the metals and mining industry, 581 is also trading below its peers, relative to earnings generated. This supports the theory that 581 is potentially underpriced.
For China Oriental Group, I've put together three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 581’s future growth? Take a look at our free research report of analyst consensus for 581’s outlook.
- Dividend Income vs Capital Gains: Does 581 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 581 as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 581? 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.