Before Investing In Dätwyler Holding Inc. (VTX:DAE), Consider This
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If you are currently a shareholder in Dätwyler Holding Inc. (VTX:DAE), or considering investing in the stock, you need to examine how the business generates cash, and how it is reinvested. What is left after investment, determines the value of the stock since this cash flow technically belongs to investors of the company. I will take you through DAE’s cash flow health and the risk-return concept based on the stock’s cash flow yield, using the most recent financial data. This will help you think about the company from a cash perspective, which is a crucial factor to investing.
See our latest analysis for Dätwyler Holding
What is Dätwyler Holding’s cash yield?
Free cash flow (FCF) is the amount of cash Dätwyler Holding has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations.
The two ways to assess whether Dätwyler Holding’s FCF is sufficient, is to compare the FCF yield to the market index yield, as well as determine whether the top-line operating cash flows will continue to grow.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
The business reinvests all its cash profits as well as borrows more money, to maintain and grow the company. This leads to a negative FCF, as well as negative FCF yield, in which case is not a very useful measure.
Does Dätwyler Holding have a favourable cash flow trend?
Can Dätwyler Holding improve its operating cash production in the future? Let’s take a quick look at the cash flow trend Dätwyler Holding is expected to deliver over time. In the next couple of years, the company is expected to grow its cash from operations at a double-digit rate of 36%, ramping up from its current levels of CHF163m to CHF222m in two years’ time. Although this seems impressive, breaking down into year-on-year growth rates, DAE’s operating cash flow growth is expected to decline from a rate of 20% next year, to 13% in the following year. However the overall picture seems encouraging, should capital expenditure levels maintain at an appropriate level.
Next Steps:
Now you know to keep cash flows in mind, I suggest you continue to research Dätwyler Holding to get a better picture of the company by looking at:
Valuation: What is DAE 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 DAE is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Dätwyler Holding’s board and the CEO’s back ground.
Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
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.
