Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Bouygues SA. Looking at its size, financial health and track record, I believe there’s an opportunity with Bouygues during these volatile times.
Bouygues SA, together with its subsidiaries, operates in the construction, telecom, and media sectors in France and internationally. Started in 1952, and led by CEO Martin Bouygues, the company size now stands at 126.42k people and with the company’s market cap sitting at €13b, it falls 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.
Bouygues currently has €6.6b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. Bouygues generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 6.95x, which is well-above the minimum requirement of 3x. Furthermore, its cash flows from operations copiously covers it debt by 34%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means EN is financially robust in the face of a volatile market.
EN’s profit growth over the previous five years has been positive, with an average annual rate of 50%, outpacing the industry growth rate of 6.8%. It has also returned an ROE of 13% recently, above the market return of 15%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Bouygues as a long-term hold.
Next Steps:Based on these three factors, EN 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 EN, 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 EN’s future growth? Take a look at our free research report of analyst consensus for EN’s outlook.
- Valuation: What is EN 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 EN 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.