Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Vita Group Limited (ASX:VTG) due to its excellent fundamentals in more than one area. VTG is a financially-sound 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, read the full report on Vita Group here.
Excellent balance sheet with solid track record and pays a dividend
VTG delivered a bottom-line expansion of 11% in the prior year, with its most recent earnings level surpassing its average level over the last five years. This strong performance generated a robust double-digit return on equity of 22%, which is an optimistic signal for the future. VTG’s debt-to-equity ratio stands at 7.9%, which means its debt level is acceptable. This indicates a good balance between taking advantage of low cost funding through debt financing, but having enough financial flexibility and headroom to grow debt in the future. VTG's has produced operating cash levels of 4.47x total debt over the past year, which implies that VTG's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
VTG 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 specialty retail industry, VTG is also trading below its peers, relative to earnings generated. This supports the theory that VTG is potentially underpriced.
For Vita Group, I've compiled three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for VTG’s future growth? Take a look at our free research report of analyst consensus for VTG’s outlook.
- Dividend Income vs Capital Gains: Does VTG 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 VTG as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of VTG? 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.