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Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on CMC Markets Plc (LON:CMCX) due to its excellent fundamentals in more than one area. CMCX is a financially-healthy company with a a excellent future outlook, not yet priced into the stock. Below, I've touched on some key aspects you should know on a high level. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on CMC Markets here.
Good value with reasonable growth potential
CMCX is an attractive stock for growth-seeking investors, with an expected earnings growth of 50% in the upcoming year, bolstered by its outstanding cash-generating ability, as analysts predict its operating cash flows will more than double over the same time period. This is a sustainable driver of high-quality earnings, as opposed to pure cost-cutting activities. CMCX's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts' consensus forecast growth be correct. Also, relative to the rest of CMCX's peers, it is also trading at a value below those of similar sizes in asset terms. This further reaffirms that CMCX is potentially undervalued.
CMCX'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 an important determinant of the company’s health. CMCX seems to have put its debt to good use, generating operating cash levels of 3x 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.
For CMC Markets, there are three pertinent factors you should further research:
- Historical Performance: What has CMCX'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.
- Dividend Income vs Capital Gains: Does CMCX 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 CMCX as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of CMCX? 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.