As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Image Systems AB (STO:IS), it is a financially-robust company with an optimistic growth outlook, not yet reflected in the 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 Image Systems here.
Excellent balance sheet and good value
IS is an attractive stock for growth-seeking investors, with an expected earnings growth of 44% 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. IS's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. Investors have the opportunity to buy into the stock to reap capital gains, if IS's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Also, relative to the rest of IS's peers, it is also trading at a value below those of similar sizes in asset terms. This supports the theory that IS is potentially underpriced.
IS is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This indicates that IS has sufficient cash flows and proper cash management in place, which is an important determinant of the company’s health. IS seems to have put its debt to good use, generating operating cash levels of 1.67x 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 Image Systems, I've put together three relevant factors you should further research:
- Historical Performance: What has IS'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 IS 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 IS as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of IS? 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.