Why Southern Cross Electrical Engineering Limited (ASX:SXE) Could Have A Place In Your Portfolio

I've been keeping an eye on Southern Cross Electrical Engineering Limited (ASX:SXE) because I'm attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe SXE has a lot to offer. Basically, it is a financially-robust company with a an impressive history superior dividend payments, trading at a great value. Below is a brief commentary on these key aspects. If you're interested in understanding beyond my broad commentary, 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 implies that SXE manages its cash and cost levels well, which is a key determinant of the company’s health. Investors should not worry about SXE’s debt levels because the company has none! It has only utilized funding from its equity capital to run the business, 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 shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. 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. Also, relative to the rest of its peers with similar levels of earnings, SXE's share price is trading below the group's average. This supports the theory that SXE is potentially underpriced.

SXE's ample net income is able to cover all of its dividend payments, which has exceeded the low-risk savings rate, adequately rewarding investors for taking on the risk of holding a stock over a riskless asset. However, it is important to remember that dividend yields are a function of stock prices and corporate profits, which can be volatile.

Next Steps:

For Southern Cross Electrical Engineering, there are three key aspects you should look at:

1. 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.
2. 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.
3. 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 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.