Attractive stocks have exceptional fundamentals. In the case of The a2 Milk Company Limited (NZSE:ATM), there’s is a financially-robust company with a great track record and a buoyant future outlook. 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 a2 Milk here.
Outstanding track record with flawless balance sheet
ATM’s outstanding revenue growth of 68% forecasted for the near future is certainly eye-catching for investors on the hunt for growth. This underlies the notable 36% return on equity over the next few years leading up to 2021. Over the past few years, ATM has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. The strong earnings growth is reflected in impressive double-digit 35% return to shareholders, which is an optimistic signal for the future.
ATM’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 indicates that ATM has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. Looking at ATM’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 NZ$7.6b 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.
For a2 Milk, I’ve put together three key aspects you should look at:
- Valuation: What is ATM 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 ATM is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does ATM 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 ATM as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ATM? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.