These Factors Make Red Hat Inc (NYSE:RHT) A Great Investment

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 Red Hat Inc (NYSE:RHT), it is a financially-healthy company with a great history and a excellent future outlook. In the following section, I expand a bit more on these key aspects. If you’re interested in understanding beyond my high-level commentary, take a look at the report on Red Hat here.

Solid track record with reasonable growth potential

Over the past few years, RHT has demonstrated a proven ability to generate robust returns of 20.7% Not surprisingly, RHT outperformed its industry which returned 12.5%, giving us more conviction of the company’s capacity to drive bottom-line growth going forward.

NYSE:RHT Future Profit August 30th 18
NYSE:RHT Future Profit August 30th 18

RHT’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. RHT’s has produced operating cash levels of 1.35x total debt over the past year, which implies that RHT’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.

NYSE:RHT Historical Debt August 30th 18
NYSE:RHT Historical Debt August 30th 18

Next Steps:

For Red Hat, I’ve compiled three essential aspects you should further research:

  1. Valuation: What is RHT 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 RHT is currently mispriced by the market.
  2. Dividend Income vs Capital Gains: Does RHT 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 RHT as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of RHT? 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.