When stock prices are falling, the best mindset to have is a long term one. High quality stocks such as Public Joint Stock Company ALROSA has fared well over time in a fickle stock market, which is why I want to bring it into light amongst all the chaos. Below I take a look at three key features of what makes a robust defensive stock investment: its size, financial health and track record.
Public Joint Stock Company ALROSA, together with subsidiaries, engages in the exploration and extraction of diamond reserves; and marketing and distribution of raw and cut diamonds in Russia. The company was established in 1957 and with the company’s market cap sitting at RUруб697b, it falls under the large-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.
Currently ALROSA has RUруб86b on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. ALROSA generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 29.91x, which is well-above the minimum requirement of 3x. Moreover, its operating cash flows amply covers its total debt by 147%, which is higher than the bare minimum requirement of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means ALRS is financially robust in the face of a volatile market.
ALRS’s annual earnings growth rate has been positive over the last five years, with an average rate of 35%, overtaking the industry growth rate of 17%. It has also returned an ROE of 41% recently, above the industry return of 9.3%. Characteristics I value in a long term investment are proven in ALROSA, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Based on these three factors, ALRS 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 ALRS, 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 ALRS’s future growth? Take a look at our free research report of analyst consensus for ALRS’s outlook.
- Valuation: What is ALRS 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 ALRS 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.