Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on China 21st Century Education Group Limited (HKG:1598) due to its excellent fundamentals in more than one area. 1598 is a financially-sound company with an impressive track record of performance, trading at a great value. Below, I've touched on some key aspects you should know on a high level. For those interested in digging a bit deeper into my commentary, take a look at the report on China 21st Century Education Group here.

Undervalued with excellent balance sheet

In the previous year, 1598 has ramped up its bottom line by 98%, with its latest earnings level surpassing its average level over the last five years. Not only did 1598 outperformed its past performance, its growth also exceeded the Consumer Services industry expansion, which generated a 11% earnings growth. This is what investors like to see! 1598's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that 1598 has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. 1598 appears to have made good use of debt, producing operating cash levels of 0.93x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.

1598 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 1598's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the consumer services industry, 1598 is also trading below its peers, relative to earnings generated. This supports the theory that 1598 is potentially underpriced.

Next Steps:

For China 21st Century Education Group, I've compiled three key aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 1598’s future growth? Take a look at our free research report of analyst consensus for 1598’s outlook.

2. Dividend Income vs Capital Gains: Does 1598 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 1598 as an investment.

3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 1598? 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.