Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Babcock International Group PLC (LON:BAB) due to its excellent fundamentals in more than one area. BAB is a financially-sound company with a a great history high-grade dividend payments, 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 Babcock International Group here.
Very undervalued 6 star dividend payer
BAB'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 crucial insight into the health of the company. BAB appears to have made good use of debt, producing operating cash levels of 0.23x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated. BAB 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 BAB's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the commercial services industry, BAB is also trading below its peers, relative to earnings generated. This bolsters the proposition that BAB's price is currently discounted.
Income investors would also be happy to know that BAB is one of the highest dividend payers in the market, with current dividend yield standing at 5.7%. BAB has also been regularly increasing its dividend payments to shareholders over the past decade.
For Babcock International Group, I've put together three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for BAB’s future growth? Take a look at our free research report of analyst consensus for BAB’s outlook.
- Historical Performance: What has BAB's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of BAB? 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.