Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Xiwang Special Steel Company Limited (HKG:1266) due to its excellent fundamentals in more than one area. 1266 is a financially-robust company with a a great history of performance, trading at a great value. In the following section, I expand a bit more on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on Xiwang Special Steel here.
Very undervalued with outstanding track record and pays a dividend
Over the past few years, 1266 has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. This strong performance generated a robust double-digit return on equity of 21%, which is what investors like to see! 1266 seems to have put its debt to good use, generating operating cash levels of 1.15x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows. Also, 1266’s earnings amply cover its interest expense. Paying interest on time and in full can help the company get favourable debt terms in the future, leading to lower cost of debt and helps 1266 expand.
1266’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. 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. Compared to the rest of the metals and mining industry, 1266 is also trading below its peers, relative to earnings generated. This further reaffirms that 1266 is potentially undervalued.
For Xiwang Special Steel, there are three important aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for 1266’s future growth? Take a look at our free research report of analyst consensus for 1266’s outlook.
- Dividend Income vs Capital Gains: Does 1266 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 1266 as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 1266? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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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.