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Why Grange Resources Limited (ASX:GRR) Could Be Your Next Investment

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Simply Wall St
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I've been keeping an eye on Grange Resources Limited (ASX:GRR) because I'm attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe GRR has a lot to offer. Basically, it is a financially-healthy company with a an impressive track record of performance, trading at a discount. Below, I've touched on some key aspects you should know on a high level. If you're interested in understanding beyond my broad commentary, read the full report on Grange Resources here.

Outstanding track record and undervalued

GRR delivered a bottom-line expansion of 87% in the prior year, with its most recent earnings level surpassing its average level over the last five years. The strong earnings growth is reflected in impressive double-digit 24% return to shareholders, which is an optimistic signal for the future. GRR'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. GRR appears to have made good use of debt, producing operating cash levels of 21.63x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.

ASX:GRR Income Statement, June 13th 2019
ASX:GRR Income Statement, June 13th 2019

GRR's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. 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. Also, relative to the rest of its peers with similar levels of earnings, GRR's share price is trading below the group's average. This bolsters the proposition that GRR's price is currently discounted.

ASX:GRR Price Estimation Relative to Market, June 13th 2019
ASX:GRR Price Estimation Relative to Market, June 13th 2019

Next Steps:

For Grange Resources, I've put together three essential factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for GRR’s future growth? Take a look at our free research report of analyst consensus for GRR’s outlook.

  2. Dividend Income vs Capital Gains: Does GRR 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 GRR as an investment.

  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of GRR? 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.