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When stock prices are falling, the best mindset to have is a long term one. High quality stocks such as Oshkosh Corporation 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.
Oshkosh Corporation designs, manufactures, and markets specialty vehicles and vehicle bodies worldwide. Started in 1917, and headed by CEO Wilson Jones, the company now has 15.00k employees and with the stock’s market cap sitting at US$5.0b, it comes 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.
With US$819m debt on its books, Oshkosh 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 12.78x, Oshkosh produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its operating cash flows amply covers its total debt by 67%, above the safe minimum of 20%. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.
OSK’s profit growth over the previous five years has been positive, with an average annual rate of 14%, overtaking the industry growth rate of 4.9%. It has also returned an ROE of 22% recently, above the industry return of 14%. Characteristics I value in a long term investment are proven in Oshkosh, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Based on these three factors, OSK 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 OSK, 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 OSK’s future growth? Take a look at our free research report of analyst consensus for OSK’s outlook.
- Valuation: What is OSK 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 OSK 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.