Why Southern Cross Electrical Engineering Limited (ASX:SXE) Is An Attractive Investment To Consider

Southern Cross Electrical Engineering Limited (ASX:SXE) 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 SXE, it is a financially-robust company with an impressive history 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 Southern Cross Electrical Engineering here.

Flawless balance sheet and undervalued

Over the past year, SXE has grown its earnings by 51%, with its most recent figure exceeding its annual average over the past five years. Not only did SXE outperformed its past performance, its growth also surpassed the Construction industry expansion, which generated a 12% earnings growth. This paints a buoyant picture for the company. SXE'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 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! This means it is running its business only on equity capital funding, which is typically normal for a small-cap company. SXE has plenty of financial flexibility, without debt obligations to meet in the short term, as well as the headroom to raise debt should it need to in the future.

SXE is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. 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.

Next Steps:

For Southern Cross Electrical Engineering, I've put together three essential factors 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. Dividend Income vs Capital Gains: Does SXE 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 SXE as an investment.
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.