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What Makes Parex Resources Inc (TSE:PXT) An Attractive Investment?

Parex Resources Inc (TSE:PXT) 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 PXT, it is a financially-sound company with a great history and an optimistic future outlook. In the following section, I expand a bit more on these key aspects. If you’re interested in understanding beyond my high-level commentary, read the full report on Parex Resources here.

Outstanding track record with flawless balance sheet

Bullish market analysts are forecasting fast-growing PXT to deliver an exceptional sales growth rate of 75.2% over the next year, supported by its outstanding capacity to churn out cash from operating activities, which is predicted to more than double over the next year. This indicates that revenue is driven by high-quality cash from PXT’s day-to-day business as opposed to one-off income. Over the past few years, PXT has more than doubled its earnings, with its most recent figure exceeding its annual average over the past five years. This strong performance generated a robust double-digit return on equity of 32.7%, which is an optimistic signal for the future.

TSX:PXT Future Profit September 4th 18
TSX:PXT Future Profit September 4th 18

PXT’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 indicates that PXT has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. Looking at PXT’s capital structure, the company has no debt on its balance sheet. This means it is running its business only on equity capital funding, which is rather impressive for a CA$2.91b market cap company. Investors’ risk associated with debt is virtually non-existent and the company has plenty of headroom to grow debt in the future, should the need arise.

TSX:PXT Historical Debt September 4th 18
TSX:PXT Historical Debt September 4th 18

Next Steps:

For Parex Resources, there are three fundamental aspects you should look at:

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

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

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