Should You Be Holding Lovisa Holdings Limited (ASX:LOV)?

Lovisa Holdings Limited (ASX:LOV) is a company with exceptional fundamental characteristics. Upon building up an investment case for a stock, we should look at various aspects. In the case of LOV, it is a financially-robust company with a great track record and a buoyant growth outlook. Below is a brief commentary on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on Lovisa Holdings here.

Flawless balance sheet with solid track record

Over the past year, LOV has grown its earnings by 44.60%, 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 72.80%, which is an optimistic signal for the future.

ASX:LOV Future Profit Jun 19th 18

LOV is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is an important determinant of the company’s health. LOV currently has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, which is typically normal for a small-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.

ASX:LOV Historical Debt Jun 19th 18

Next Steps:

For Lovisa Holdings, I’ve compiled three fundamental factors you should further examine:

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

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

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