Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Compagnie Plastic Omnium SA (EPA:POM) due to its excellent fundamentals in more than one area. POM is a financially-sound company with a a great track record of performance, trading at a great value. Below, I’ve touched on some key aspects you should know on a high level. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on Compagnie Plastic Omnium here.
Solid track record with excellent balance sheet and pays a dividend
In the previous year, POM has ramped up its bottom line by 31%, with its latest earnings level surpassing its average level over the last five years. This strong performance generated a robust double-digit return on equity of 25%, which is what investors like to see! POM’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. POM seems to have put its debt to good use, generating operating cash levels of 0.45x 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.
POM’s shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. Investors have the opportunity to buy into the stock to reap capital gains, if POM’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the auto components industry, POM is also trading below its peers, relative to earnings generated. This supports the theory that POM is potentially underpriced.
For Compagnie Plastic Omnium, there are three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for POM’s future growth? Take a look at our free research report of analyst consensus for POM’s outlook.
- Dividend Income vs Capital Gains: Does POM 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 POM as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of POM? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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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.