Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Sims Metal Management Limited (ASX:SGM) due to its excellent fundamentals in more than one area. SGM is a company that has been able to sustain great financial health, trading at an attractive share price. Below is a brief commentary on these key aspects. For those interested in digging a bit deeper into my commentary, take a look at the report on Sims Metal Management here.
Flawless balance sheet and good value
SGM is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that SGM manages its cash and cost levels well, which is a crucial insight into the health of the company. SGM's has produced operating cash levels of 2.25x total debt over the past year, which implies that SGM's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings. SGM's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of SGM's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the metals and mining industry, SGM is also trading below its peers, relative to earnings generated. This further reaffirms that SGM is potentially undervalued.
For Sims Metal Management, I've compiled three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SGM’s future growth? Take a look at our free research report of analyst consensus for SGM’s outlook.
- Historical Performance: What has SGM'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 SGM? 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.