Schaffer Corporation Limited (ASX:SFC) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of SFC, it is a financially-healthy company with a an impressive track record of performance, trading at a discount. In the following section, I expand a bit more on these key aspects. If you’re interested in understanding beyond my broad commentary, read the full report on Schaffer here.
Outstanding track record with excellent balance sheet and pays a dividend
Over the past few years, SFC 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 27%, which is an optimistic signal for the future. SFC’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that SFC manages its cash and cost levels well, which is an important determinant of the company’s health. SFC seems to have put its debt to good use, generating operating cash levels of 0.57x 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.
SFC 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 SFC’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the auto components industry, SFC is also trading below its peers, relative to earnings generated. This supports the theory that SFC is potentially underpriced.
Next Steps:
For Schaffer, I’ve compiled three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SFC’s future growth? Take a look at our free research report of analyst consensus for SFC’s outlook.
- Dividend Income vs Capital Gains: Does SFC 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 SFC as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of SFC? 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.