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Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Southern Cross Electrical Engineering Limited (ASX:SXE) due to its excellent fundamentals in more than one area. SXE is a financially-healthy company with a a great track record high-quality dividend payments, trading at a discount. Below is a brief commentary on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, read the full report on Southern Cross Electrical Engineering here.
Very undervalued with flawless balance sheet and pays a dividend
SXE's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that SXE has sufficient cash flows and proper cash management in place, which is an important determinant of the company’s health. SXE currently has no debt on its balance sheet. This means it is running its business only on equity capital funding, 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. SXE's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of SXE's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the construction industry, SXE is also trading below its peers, relative to earnings generated. This further reaffirms that SXE is potentially undervalued.
SXE has been able to reinvest its profits, as well as pay some out as dividends, which has been higher than the low-risk savings rate, sufficiently rewarding shareholders for taking on the risk of investing in the stock market. However, it is important to remember that dividend yields are a function of stock prices and corporate profits, which can be volatile.
For Southern Cross Electrical Engineering, I've put together three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SXE’s future growth? Take a look at our free research report of analyst consensus for SXE’s outlook.
- Historical Performance: What has SXE's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of SXE? 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.