Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on FLSmidth & Co. A/S (CPH:FLS) due to its excellent fundamentals in more than one area. FLS is a financially-robust company with a great track record of performance, trading at a discount. Below, I've touched on some key aspects you should know on a high level. If you're interested in understanding beyond my broad commentary, take a look at the report on FLSmidth here.
Flawless balance sheet, good value and pays a dividend
In the previous year, FLS has ramped up its bottom line by 79%, with its latest earnings level surpassing its average level over the last five years. Not only did FLS outperformed its past performance, its growth also exceeded the Machinery industry expansion, which generated a 4.9% earnings growth. This paints a buoyant picture for the company. FLS's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that FLS has sufficient cash flows and proper cash management in place, which is an important determinant of the company’s health. FLS seems to have put its debt to good use, generating operating cash levels of 0.26x 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.
FLS is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. Investors have the opportunity to buy into the stock to reap capital gains, if FLS's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the capital goods industry, FLS is also trading below its peers, relative to earnings generated. This bolsters the proposition that FLS's price is currently discounted.
For FLSmidth, there are three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FLS’s future growth? Take a look at our free research report of analyst consensus for FLS’s outlook.
- Dividend Income vs Capital Gains: Does FLS 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 FLS as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of FLS? 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.