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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 Valmet Oyj. Why? Size. Financial health. Proven performance.
Valmet Oyj, together with its subsidiaries, develops and supplies process technologies, automation, and services for the pulp, paper, and energy industries in Finland, North America, South America, Europe, the Middle East, Africa, China, and the Asia-Pacific. The company provides employment to 12.54k people and with the market cap of €3.3b, it falls under the mid-cap stocks category. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.
With €307m debt on its books, Valmet Oyj has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. Valmet Oyj generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 50.4x, which is well-above the minimum requirement of 3x. Furthermore, its operating cash flows amply covers its total debt by 96%, 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.
VALMT’s profit growth over the previous five years has been positive, with an average annual rate of 40%, outperfoming the industry growth rate of 8.6%. It has also returned an ROE of 20% recently, above the industry return of 14%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Valmet Oyj as a long-term hold.
Next Steps:Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Valmet Oyj tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
- Future Outlook: What are well-informed industry analysts predicting for VALMT’s future growth? Take a look at our free research report of analyst consensus for VALMT’s outlook.
- Valuation: What is VALMT 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 VALMT 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 firstname.lastname@example.org. 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.