Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Tencent Holdings Limited (HKG:700) due to its excellent fundamentals in more than one area. 700 is a financially-healthy company with a strong history and an optimistic future outlook. In the following section, I expand a bit more on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on Tencent Holdings here.
Solid track record with reasonable growth potential
Investors in search of impressive top-line expansion should look no further than 700, with its expected 63% revenue growth in the upcoming year. This is expected to flow down into an impressive return on equity of 24% over the next couple of years. In the previous year, 700 has ramped up its bottom line by 39%, with its latest earnings level surpassing its average level over the last five years. The strong earnings growth is reflected in impressive double-digit 26% return to shareholders, which is what investors like to see!
700 is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is a crucial insight into the health of the company. 700 seems to have put its debt to good use, generating operating cash levels of 0.59x 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 Tencent Holdings, I’ve put together three relevant aspects you should further research:
- Valuation: What is 700 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 700 is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does 700 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 700 as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 700? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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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.