Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Diodes Incorporated (NASDAQ:DIOD) due to its excellent fundamentals in more than one area. DIOD is a financially-healthy company with a strong history of performance, trading at a great value. 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 Diodes here.
Excellent balance sheet and good value
Over the past few years, DIOD has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. Not only did DIOD outperformed its past performance, its growth also exceeded the Semiconductor industry expansion, which generated a 14% earnings growth. This paints a buoyant picture for the company. DIOD'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 key determinant of the company’s health. DIOD seems to have put its debt to good use, generating operating cash levels of 0.88x 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.
DIOD's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of DIOD's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Also, relative to the rest of its peers with similar levels of earnings, DIOD's share price is trading below the group's average. This supports the theory that DIOD is potentially underpriced.
For Diodes, there are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for DIOD’s future growth? Take a look at our free research report of analyst consensus for DIOD’s outlook.
- Dividend Income vs Capital Gains: Does DIOD 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 DIOD as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of DIOD? 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.