Parex Resources Inc. (TSE:PXT) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of PXT, it is a financially-healthy company with a great history of performance, trading at a great value. Below is a brief commentary on these key aspects. For those interested in digging a bit deeper into my commentary, read the full report on Parex Resources here.
Flawless balance sheet and undervalued
Over the past few years, PXT has demonstrated a proven ability to generate robust returns of 25%. Not surprisingly, PXT outperformed its industry which returned 7.4%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. PXT'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 implies that PXT manages its cash and cost levels well, which is an important determinant of the company’s health. Looking at PXT's capital structure, the company has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, which is rather impressive for a CA$2.8b market cap company. Investors’ risk associated with debt is virtually non-existent and the company has plenty of headroom to grow debt in the future, should the need arise.
PXT is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. 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. Compared to the rest of the oil and gas industry, PXT is also trading below its peers, relative to earnings generated. This bolsters the proposition that PXT's price is currently discounted.
For Parex Resources, there are three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PXT’s future growth? Take a look at our free research report of analyst consensus for PXT’s outlook.
- Dividend Income vs Capital Gains: Does PXT 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 PXT as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of PXT? 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.