Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Frontier Developments plc (LON:FDEV) due to its excellent fundamentals in more than one area. FDEV is a financially-sound company with a great track record and an optimistic growth outlook. In the following section, I expand a bit more on these key aspects. For those interested in digging a bit deeper into my commentary, read the full report on Frontier Developments here.
Outstanding track record with flawless balance sheet
FDEV 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. This strong performance generated a robust double-digit return on equity of 24%, which is an notable feat for the company.
FDEV'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 FDEV has sufficient cash flows and proper cash management in place, which is a crucial insight into the health of the company. Looking at FDEV'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 typically normal for a small-cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future.
For Frontier Developments, there are three fundamental aspects you should further research:
- Valuation: What is FDEV 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 FDEV is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does FDEV 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 FDEV as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of FDEV? 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.