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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 Allied Digital Services Limited (NSE:ADSL), it is a company that has been able to sustain great financial health, trading at an attractive share price. Below is a brief commentary on these key aspects. If you're interested in understanding beyond my broad commentary, take a look at the report on Allied Digital Services here.
Undervalued with excellent balance sheet
ADSL'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 an important determinant of the company's health. ADSL seems to have put its debt to good use, generating operating cash levels of 0.49x 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. ADSL is currently trading below its true value, which means the market is undervaluing the company's expected cash flow going forward. Investors have the opportunity to buy into the stock to reap capital gains, if ADSL's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the it industry, ADSL is also trading below its peers, relative to earnings generated. This supports the theory that ADSL is potentially underpriced.
For Allied Digital Services, there are three essential factors you should look at:
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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.