As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Qualstar Corporation (NASDAQ:QBAK), it is a financially-robust company with a a strong track record of performance, trading at a discount. Below, I’ve touched on some key aspects you should know on a high level. For those interested in digger a bit deeper into my commentary, read the full report on Qualstar here.
Flawless balance sheet with outstanding track record
Over the past few years, QBAK has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. This illustrates a strong track record, leading to a satisfying return on equity of 20%, which is an optimistic signal for the future. QBAK’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. Looking at QBAK’s capital structure, the company has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, 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.
QBAK’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 QBAK’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Also, relative to the rest of its peers with similar levels of earnings, QBAK’s share price is trading below the group’s average. This bolsters the proposition that QBAK’s price is currently discounted.
For Qualstar, there are three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for QBAK’s future growth? Take a look at our free research report of analyst consensus for QBAK’s outlook.
- Dividend Income vs Capital Gains: Does QBAK 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 QBAK as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of QBAK? 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 email@example.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.