Vidrala, S.A. is a financially healthy and robust stock with a proven track record of outperformance. We all know Vidrala, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.
Vidrala, S.A. manufactures and sells glass containers in Spain, the United Kingdom/Ireland, France, Italy, Portugal, and internationally. Established in 1965, and led by CEO Gorka Schmitt Zalbide, the company now has 3.79k employees and with the market cap of €2.2b, it falls under the mid-cap stocks category. 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.
Vidrala currently has €434m debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With an interest coverage ratio of 22.2x, Vidrala 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 47%, which is higher than the bare minimum requirement 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.
VID’s profit growth over the previous five years has been positive, with an average annual rate of 17%, overtaking the industry growth rate of 16%. It has also returned an ROE of 19% recently, above the industry return of 12%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Vidrala as an investment over the long run.
Next Steps:Based on these three factors, VID 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 VID, 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 VID’s future growth? Take a look at our free research report of analyst consensus for VID’s outlook.
- Valuation: What is VID 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 VID 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.