I’ve been keeping an eye on Compumedics Limited (ASX:CMP) because I’m attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe CMP has a lot to offer. Basically, it is a financially-sound company with a strong history and a excellent future outlook. 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 Compumedics here.

Flawless balance sheet with high growth potential

Investors in search for stocks with room to flourish should look no further than CMP, with its expected earnings growth of 36%. Earnings growth is paired with an eye-catching top-line trajectory also doubling over the same period, which indicates a high-quality bottom-line expansion, as opposed to those driven by unsustainable cost-cutting activities. In the past couple of years, CMP has ramped up its bottom line by over 100%, with its latest earnings level surpassing its average level over the last five years. In addition to beating its historical values, CMP also outperformed its industry, which delivered a growth of 13%. This is an notable feat for the company.

CMP’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that CMP has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. CMP seems to have put its debt to good use, generating operating cash levels of 0.3x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows.

Next Steps:

For Compumedics, I’ve compiled three key factors you should further research:

1. Valuation: What is CMP 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 CMP is currently mispriced by the market.

2. Dividend Income vs Capital Gains: Does CMP 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 CMP as an investment.

3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of CMP? 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.