Is Deutsche Rohstoff AG (ETR:DR0) Potentially Underrated?

Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Deutsche Rohstoff AG (ETR:DR0) due to its excellent fundamentals in more than one area. DR0 is a financially-healthy company with a a strong track record of performance, trading at a great value. In the following section, I expand a bit more on these key aspects. If you're interested in understanding beyond my high-level commentary, read the full report on Deutsche Rohstoff here.

Solid track record, good value and pays a dividend

DR0 delivered a bottom-line expansion of 75% in the prior year, with its most recent earnings level surpassing its average level over the last five years. The strong earnings growth is reflected in impressive double-digit 25% return to shareholders, which is an optimistic signal for the future. DR0 is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. DR0 seems to have put its debt to good use, generating operating cash levels of 0.38x 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.

DR0's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. Investors have the opportunity to buy into the stock to reap capital gains, if DR0's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the oil and gas industry, DR0 is also trading below its peers, relative to earnings generated. This bolsters the proposition that DR0's price is currently discounted.

Next Steps:

For Deutsche Rohstoff, I've compiled three pertinent factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for DR0’s future growth? Take a look at our free research report of analyst consensus for DR0’s outlook.
2. Dividend Income vs Capital Gains: Does DR0 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 DR0 as an investment.
3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of DR0? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.