I’ve been keeping an eye on ARC Resources Ltd. (TSE:ARX) because I’m attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe ARX has a lot to offer. Basically, it is a financially-sound company with a strong track record of performance, trading at a discount. Below, I’ve touched on some key aspects you should know on a high level. If you’re interested in understanding beyond my broad commentary, read the full report on ARC Resources here.
Excellent balance sheet and good value
In the previous year, ARX has ramped up its bottom line by 86%, with its latest earnings level surpassing its average level over the last five years. Not only did ARX outperformed its past performance, its growth also surpassed the Oil and Gas industry expansion, which generated a 58% earnings growth. This is what investors like to see! ARX’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 suggests prudent control over cash and cost by management, which is a key determinant of the company’s health. ARX’s has produced operating cash levels of 0.96x total debt over the past year, which implies that ARX’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
ARX’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of ARX’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the market, ARX is also trading below other listed companies on the CA stock exchange, relative to earnings generated. This supports the theory that ARX is potentially underpriced.
Next Steps:
For ARC Resources, there are three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ARX’s future growth? Take a look at our free research report of analyst consensus for ARX’s outlook.
- Dividend Income vs Capital Gains: Does ARX 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 ARX as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ARX? 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.