Should You Buy Dassault Aviation SA (EPA:AM) When Prices Drop?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Stock market crashes are an opportune time to buy. High quality companies, such as Dassault Aviation SA, are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.

View our latest analysis for Dassault Aviation

Dassault Aviation SA engages in the aeronautical business in France and internationally. The company now has 11.49k employees and with the stock’s market cap sitting at €10b, it comes under the large-cap group. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.

ENXTPA:AM Historical Debt, June 18th 2019
ENXTPA:AM Historical Debt, June 18th 2019

Currently Dassault Aviation has €995m on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. Dassault Aviation generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 5.77x, which is well-above the minimum requirement of 3x. Furthermore, its cash flows from operations copiously covers it debt by 126%, above the safe minimum of 20%. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning AM’s financial strength will continue to let it thrive in a fickle market.

ENXTPA:AM Income Statement, June 18th 2019
ENXTPA:AM Income Statement, June 18th 2019

AM’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 13%, beating the industry growth rate of 7.3%. It has also returned an ROE of 13% recently, above the industry return of 12%. Dassault Aviation’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.

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. Dassault Aviation 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:
  1. Future Outlook: What are well-informed industry analysts predicting for AM’s future growth? Take a look at our free research report of analyst consensus for AM’s outlook.
  2. Management: Who are the people running the company? Experienced management and board are important for setting the right strategy during a volatile market. Take a look at information on AM’s executive and directors here.
  3. 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 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.