Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Attractive stocks have exceptional fundamentals. In the case of Codan Limited (ASX:CDA), there's is a financially-healthy 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 Codan here.
Flawless balance sheet, good value and pays a dividend
Over the past few years, CDA has demonstrated a proven ability to generate robust returns of 24%. Not surprisingly, CDA outperformed its industry which returned 15%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. CDA's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that CDA manages its cash and cost levels well, which is a crucial insight into the health of the company. Investors should not worry about CDA’s debt levels because the company has none! This means it is running its business only on equity capital funding, which is typically normal for a small-cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future.
CDA'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 CDA's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the electronic industry, CDA is also trading below its peers, relative to earnings generated. This bolsters the proposition that CDA's price is currently discounted.
For Codan, there are three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CDA’s future growth? Take a look at our free research report of analyst consensus for CDA’s outlook.
- Dividend Income vs Capital Gains: Does CDA 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 CDA as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of CDA? 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.