Is Cogelec SA (EPA:COGEC) Potentially Underrated?

Cogelec SA (EPA:COGEC) is a stock with outstanding fundamental characteristics. When we build an investment case, we need to look at the stock with a holistic perspective. In the case of COGEC, it is a financially-sound company with a an optimistic growth outlook, not yet reflected in the share price. In the following section, I expand a bit more on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on Cogelec here.

Undervalued with high growth potential

COGEC is an attractive stock for growth-seeking investors, with an expected earnings growth of 72% in the upcoming year. This growth in the bottom-line is bolstered by an impressive top-line expansion of 59% over the same period, which is a sustainable driver of high-quality earnings, as opposed to pure cost-cutting activities. COGEC’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of COGEC’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the communications industry, COGEC is also trading below its peers, relative to earnings generated. This bolsters the proposition that COGEC’s price is currently discounted.

ENXTPA:COGEC Past and Future Earnings, March 21st 2019
ENXTPA:COGEC Past and Future Earnings, March 21st 2019

COGEC’s strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings. This indicates that COGEC has sufficient cash flows and proper cash management in place, which is a crucial insight into the health of the company. COGEC 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.

ENXTPA:COGEC Historical Debt, March 21st 2019
ENXTPA:COGEC Historical Debt, March 21st 2019

Next Steps:

For Cogelec, I’ve put together three fundamental factors you should further examine:

  1. Historical Performance: What has COGEC’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Dividend Income vs Capital Gains: Does COGEC 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 COGEC as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of COGEC? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

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.