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Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) is a stock with outstanding fundamental characteristics. When we build an investment case, we need to look at the stock with a holistic perspective. In the case of 520, it is a financially-healthy company with an impressive history and a excellent future outlook. Below, I’ve touched on some key aspects you should know on a high level. For those interested in digger a bit deeper into my commentary, read the full report on Xiabuxiabu Catering Management (China) Holdings here.
Flawless balance sheet with high growth potential
One reason why investors are attracted to 520 is its earnings growth potential in the near future of 21% underlying the notable 25% return on equity over the next few years leading up to 2021. Over the past few years, 520 has demonstrated a proven ability to generate robust returns of 21% Unsurprisingly, 520 surpassed the Hospitality industry return of 6.9%, which gives us more confidence of the company’s capacity to drive earnings going forward.
520’s strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings. This suggests prudent control over cash and cost by management, which is a key determinant of the company’s health. Investors should not worry about 520’s debt levels because the company has none! This means it is running its business only on equity capital funding, which is typically normal for a small-cap company. 520 has plenty of financial flexibility, without debt obligations to meet in the short term, as well as the headroom to raise debt should it need to in the future.
Next Steps:
For Xiabuxiabu Catering Management (China) Holdings, I’ve compiled three relevant factors you should further examine:
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Valuation: What is 520 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 520 is currently mispriced by the market.
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Dividend Income vs Capital Gains: Does 520 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 520 as an investment.
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Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 520? 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.