Should Whitehaven Coal Limited (ASX:WHC) Be Your Next Stock Pick?
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Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Whitehaven Coal Limited (ASX:WHC) due to its excellent fundamentals in more than one area. WHC is a financially-sound company with a a strong history of performance, trading at a great value. Below is a brief commentary on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on Whitehaven Coal here.
Excellent balance sheet established dividend payer
WHC delivered a satisfying double-digit returns of 12% in the most recent year Unsurprisingly, WHC surpassed the industry return of 12%, which gives us more confidence of the company's capacity to drive earnings going forward. WHC's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that WHC has sufficient cash flows and proper cash management in place, which is an important determinant of the company’s health. WHC's has produced operating cash levels of 1.69x total debt over the past year, which implies that WHC's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
WHC is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of WHC's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the oil and gas industry, WHC is also trading below its peers, relative to earnings generated. This further reaffirms that WHC is potentially undervalued.
Next Steps:
For Whitehaven Coal, I've compiled three fundamental aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for WHC’s future growth? Take a look at our free research report of analyst consensus for WHC’s outlook.
Dividend Income vs Capital Gains: Does WHC 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 WHC as an investment.
Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of WHC? 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 editorial-team@simplywallst.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.
