Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on HMS Networks AB (publ) (STO:HMS) due to its excellent fundamentals in more than one area. HMS is a financially-sound company with a strong history and a excellent growth outlook. Below is a brief commentary on these key aspects. For those interested in digging a bit deeper into my commentary, take a look at the report on HMS Networks here.
Outstanding track record with high growth potential
HMS is an attractive stock for growth-seeking investors, with an expected earnings growth of 23% in the upcoming year underlying the notable 24% return on equity over the next few years leading up to 2022. HMS delivered a bottom-line expansion of 30% in the prior year, with its most recent earnings level surpassing its average level over the last five years. This illustrates a strong track record, leading to a satisfying return on equity of 20%. which is an notable feat for the company.
HMS’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. HMS seems to have put its debt to good use, generating operating cash levels of 0.46x 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.
For HMS Networks, there are three relevant factors you should further research:
- Valuation: What is HMS 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 HMS is currently mispriced by the market.
- Dividend Income vs Capital Gains: Does HMS 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 HMS as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of HMS? 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 email@example.com. 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.