Attractive stocks have exceptional fundamentals. In the case of Horizon Oil Limited (ASX:HZN), there's is a financially-healthy company with an impressive history of performance, trading at a discount. Below is a brief commentary on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, read the full report on Horizon Oil here.
Undervalued with excellent balance sheet
HZN delivered a satisfying double-digit returns of 25% in the most recent year. Not surprisingly, HZN outperformed its industry which returned 18%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. HZN's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that HZN has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. HZN appears to have made good use of debt, producing operating cash levels of 1.52x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.
HZN's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of HZN's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Also, relative to the rest of its peers with similar levels of earnings, HZN's share price is trading below the group's average. This bolsters the proposition that HZN's price is currently discounted.
For Horizon Oil, I've put together three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for HZN’s future growth? Take a look at our free research report of analyst consensus for HZN’s outlook.
- Dividend Income vs Capital Gains: Does HZN 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 HZN as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of HZN? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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.