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An Examination Of STMicroelectronics N.V. (EPA:STM)

Simply Wall St

I've been keeping an eye on STMicroelectronics N.V. (EPA:STM) because I'm attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe STM has a lot to offer. Basically, it is a financially-robust company with an impressive track record of performance, trading at a discount. In the following section, I expand a bit more on these key aspects. If you're interested in understanding beyond my broad commentary, read the full report on STMicroelectronics here.

Good value with proven track record

STM has a strong track record of performance. In the previous year, STM delivered an impressive double-digit return of 9.8% Not surprisingly, STM outperformed its industry which returned 6.9%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. STM's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that STM has sufficient cash flows and proper cash management in place, which is a crucial insight into the health of the company. STM's has produced operating cash levels of 0.77x total debt over the past year, which implies that STM's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.

ENXTPA:STM Income Statement, August 14th 2019

STM is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of STM'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, STM's share price is trading below the group's average. This supports the theory that STM is potentially underpriced.

ENXTPA:STM Intrinsic value, August 14th 2019

Next Steps:

For STMicroelectronics, there are three fundamental aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for STM’s future growth? Take a look at our free research report of analyst consensus for STM’s outlook.
  2. Dividend Income vs Capital Gains: Does STM 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 STM as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of STM? 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.