When stocks are plummeting in price, it’s hard to start buying into all the uncertainty. But a disciplined long term investor knows there’s no better time to buy than right now. And I’m not talking about buying into speculative, high-risk stocks. I’m talking about the well-proven, robust track record Viva Energy Group Limited. Why? Size. Financial health. Proven performance.
Viva Energy Group Limited operates as an integrated downstream petroleum company in Australia. Viva Energy Group is run by CEO Scott Wyatt. With the stock’s market cap sitting at AU$4.9b, it falls under the mid-cap group Generally, large-cap stocks are well-resourced and well-established meaning that a bear market will cause it to rejig some short-term capital allocations, but stock market volatility is hardly detrimental to its financial health and business operations. Therefore large-cap stocks are a safe bet to buy more of when the wider market is going down and down.
With AU$159m debt on its books, Viva Energy Group has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. With an interest coverage ratio of 9.85x, Viva Energy Group produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its cash flows from operations copiously covers it debt by 180%, above the safe minimum of 20%. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.
VEA’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 19%, outpacing the market growth rate of 19%. It has also returned an ROE of 21% recently, above the industry return of 16%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Viva Energy Group as a long-term hold.
Next Steps:Based on these three factors, VEA makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy VEA, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for VEA’s future growth? Take a look at our free research report of analyst consensus for VEA’s outlook.
- Valuation: What is VEA 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 VEA is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.