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Endava plc (NYSE:DAVA): A Fundamentally Attractive Investment

Simply Wall St

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Attractive stocks have exceptional fundamentals. In the case of Endava plc (NYSE:DAVA), there's is a financially-healthy company with a strong history and a buoyant future outlook. 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 Endava here.

Flawless balance sheet with high growth potential

One reason why investors are attracted to DAVA is its earnings growth potential in the near future of 37% underlying the notable 30% return on equity over the next few years leading up to 2022. In the previous year, DAVA has ramped up its bottom line by 13%, with its latest earnings level surpassing its average level over the last five years. Not only did DAVA outperformed its past performance, its growth also surpassed the IT industry expansion, which generated a 11% earnings growth. This paints a buoyant picture for the company.

NYSE:DAVA Past and Future Earnings, July 17th 2019
NYSE:DAVA Past and Future Earnings, July 17th 2019

DAVA is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This indicates that DAVA has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. DAVA appears to have made good use of debt, producing operating cash levels of 1263x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.

NYSE:DAVA Historical Debt, July 17th 2019
NYSE:DAVA Historical Debt, July 17th 2019

Next Steps:

For Endava, I've put together three important aspects you should further research:

  1. Valuation: What is DAVA 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 DAVA is currently mispriced by the market.

  2. Dividend Income vs Capital Gains: Does DAVA 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 DAVA as an investment.

  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of DAVA? 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.