Stock market crashes are an opportune time to buy. High quality companies, such as Koninklijke Philips N.V., are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.
Koninklijke Philips N.V. operates as a health technology company worldwide. Started in 1891, and led by CEO François van Houten, the company currently employs 77.40k people and has a market cap of €32b, putting it in the large-cap category. 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.
With €4.8b debt on its books, Koninklijke Philips has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. With an interest coverage ratio of 14.31x, Koninklijke Philips produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Moreover, its operating cash flows amply covers its total debt by 50%, which is higher than the bare minimum requirement of 20%. And, a given, its liquidity ratio holds up well with cash and other liquid assets exceeding upcoming liabilities, meaning PHIA's financial strength will continue to let it thrive in a fickle market.
PHIA’s profit growth over the previous five years has been positive, with an average annual rate of 14%, beating the industry growth rate of 13%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Koninklijke Philips as an investment over the long run.
Next Steps:Based on these three factors, PHIA 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 PHIA, 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 PHIA’s future growth? Take a look at our free research report of analyst consensus for PHIA’s outlook.
- Valuation: What is PHIA 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 PHIA 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.
Koninklijke Philips N.V. operates as a health technology company in North America and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
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Good value average dividend payer.