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Ester Industries Limited (NSE:ESTER) is a stock with outstanding fundamental characteristics. When we build an investment case, we need to look at the stock with a holistic perspective. In the case of ESTER, it is a financially-healthy company with a an impressive history of performance, trading at a discount. Below is a brief commentary on these key aspects. For those interested in digger a bit deeper into my commentary, take a look at the report on Ester Industries here.
Solid track record and good value
ESTER delivered a triple-digit bottom-line expansion over the past couple of years, with its most recent earnings level surpassing its average level over the last five years. In addition to beating its historical values, ESTER also outperformed its industry, which delivered a growth of 14%. This is an optimistic signal for the future. ESTER's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This suggests prudent control over cash and cost by management, which is a key determinant of the company’s health. ESTER's has produced operating cash levels of 0.22x total debt over the past year, which implies that ESTER's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
ESTER is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. Investors have the opportunity to buy into the stock to reap capital gains, if ESTER's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Also, relative to the rest of its peers with similar levels of earnings, ESTER's share price is trading below the group's average. This supports the theory that ESTER is potentially underpriced.
For Ester Industries, there are three fundamental aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ESTER’s future growth? Take a look at our free research report of analyst consensus for ESTER’s outlook.
- Dividend Income vs Capital Gains: Does ESTER 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 ESTER as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ESTER? 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 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.