Brief Commentary On Lee and Man Paper Manufacturing Limited’s (HKG:2314) Fundamentals

As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Lee and Man Paper Manufacturing Limited (HKG:2314), it is a financially-robust company with a a strong track record of performance, trading at a discount. Below, I’ve touched on some key aspects you should know on a high level. If you’re interested in understanding beyond my high-level commentary, take a look at the report on Lee and Man Paper Manufacturing here.

Outstanding track record with excellent balance sheet and pays a dividend

2314 delivered a bottom-line expansion of 61% in the prior year, with its most recent earnings level surpassing its average level over the last five years. The strong earnings growth is reflected in impressive double-digit 24% return to shareholders, which is an notable feat for the company. 2314’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 suggests prudent control over cash and cost by management, which is a key determinant of the company’s health. 2314 appears to have made good use of debt, producing operating cash levels of 0.24x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.

SEHK:2314 Income Statement Export November 9th 18
SEHK:2314 Income Statement Export November 9th 18

2314’s shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts’ consensus forecast growth be correct. Also, relative to the rest of its peers with similar levels of earnings, 2314’s share price is trading below the group’s average. This bolsters the proposition that 2314’s price is currently discounted.

SEHK:2314 PE PEG Gauge November 9th 18
SEHK:2314 PE PEG Gauge November 9th 18

Next Steps:

For Lee and Man Paper Manufacturing, I’ve put together three fundamental aspects you should look at:

  1. Future Outlook: What are well-informed industry analysts predicting for 2314’s future growth? Take a look at our free research report of analyst consensus for 2314’s outlook.
  2. Dividend Income vs Capital Gains: Does 2314 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 2314 as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 2314? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.