Should You Buy Xinyi Solar Holdings Limited (HKG:968) When Prices Drop?

When stocks are plummeting in price, it’s hard to start buying into all the uncertainty. But a disciplined long term investor knows there’s no better time to buy than right now. And I’m not talking about buying into speculative, high-risk stocks. I’m talking about the well-proven, robust track record Xinyi Solar Holdings Limited. Why? Size. Financial health. Proven performance.

See our latest analysis for Xinyi Solar Holdings

Xinyi Solar Holdings Limited, an investment holding company, produces and sells solar glass products in the People’s Republic of China, Malaysia, and internationally. Established in 2011, and headed by CEO Yau Ching Lee, the company employs 3.31k people and with the market cap of HK$32b, it falls under the mid-cap stocks category. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.

SEHK:968 Historical Debt, March 29th 2019
SEHK:968 Historical Debt, March 29th 2019

With HK$8.8b debt on its books, Xinyi Solar Holdings has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. Xinyi Solar Holdings generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 9.95x, which is well-above the minimum requirement of 3x. Furthermore, its operating cash flows amply covers its total debt by 22%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means 968 is financially robust in the face of a volatile market.

SEHK:968 Income Statement, March 29th 2019
SEHK:968 Income Statement, March 29th 2019

968’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 32%, beating the industry growth rate of 20%. It has also returned an ROE of 17% recently, above the industry return of 8.1%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Xinyi Solar Holdings as an investment over the long run.

Next Steps:

Xinyi Solar Holdings makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Xinyi Solar Holdings? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for 968’s future growth? Take a look at our free research report of analyst consensus for 968’s outlook.
  2. Valuation: What is 968 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 968 is currently mispriced by the market.
  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.