Should You Be Holding UniVision Engineering Limited (LON:UVEL)?

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UniVision Engineering Limited (LON:UVEL) 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 UVEL, it is a financially-healthy company with a a strong history 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 digger a bit deeper into my commentary, take a look at the report on UniVision Engineering here.

Flawless balance sheet and undervalued

Over the past few years, UVEL has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. This strong performance generated a robust double-digit return on equity of 21%, which is what investors like to see! UVEL is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. UVEL currently has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, which is typically normal for a small-cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future.

UVEL'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 UVEL's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the electronic industry, UVEL is also trading below its peers, relative to earnings generated. This supports the theory that UVEL is potentially underpriced.

Next Steps:

For UniVision Engineering, there are three relevant aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for UVEL’s future growth? Take a look at our free research report of analyst consensus for UVEL’s outlook.
2. Dividend Income vs Capital Gains: Does UVEL 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 UVEL as an investment.
3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of UVEL? 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.