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Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on PWR Holdings Limited (ASX:PWH) due to its excellent fundamentals in more than one area. PWH is a financially-robust company with a great track record and an optimistic future outlook. Below is a brief commentary on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on PWR Holdings here.
Flawless balance sheet with high growth potential
PWH is an attractive stock for growth-seeking investors, with an expected earnings growth of 20% in the upcoming year which is expected to flow into an impressive return on equity of 30% over the next couple of years. In the previous year, PWH has ramped up its bottom line by 27%, with its latest earnings level surpassing its average level over the last five years. This strong performance generated a robust double-digit return on equity of 28%, which paints a buoyant picture for the company.
PWH’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 implies that PWH manages its cash and cost levels well, which is an important determinant of the company’s health. PWH seems to have put its debt to good use, generating operating cash levels of 3.4x 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.
Next Steps:
For PWR Holdings, there are three key aspects you should further examine:
- Valuation: What is PWH 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 PWH is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does PWH 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 PWH as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of PWH? 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.