The coronavirus is causing the share market to sell off as the infection spreads in different countries.
No-one knows what the final economic impact will be, but it's certainly affecting share prices. When things get dicey for the business world, it's the companies that have excellent cashflow and strong balance sheets that will ride it out the easiest.
It also helps when you can find businesses that have excellent products, good profit margins and a long growth tailwind.
Here are two companies that I think perfectly fit the bill:
A2 Milk Company Ltd (ASX: A2M)
The infant formula company had zero debt and a closing cash balance of NZ$618.4 million at 31 December 2019 with operating cashflow of $160.6 million for the six months to 31 December 2019. It has a very strong balance sheet.
A2 Milk continues to grow at an impressive rate. In the half-year result its revenue increased by 31.6% to NZ$806.7 million and earnings per share rose by 20.6% to NZ25.15 cents.
A few years ago it was A2 Milk making all of the headlines with high levels of Asian demand for the product. Whilst toilet paper is grabbing the attention in the supermarkets, A2 Milk formula is now flying off the shelves again too.
Several months ago investors were worried about the A2 Milk earnings before interest, tax, depreciation and amortisation (EBITDA) margin. Now the company seems to found the right balance between investing for growth and maintaining profitability with a margin of around 30%.
A2 Milk is trading at just over 30x FY21's estimated earnings.
Altium Limited (ASX: ALU)
The electronic PCB software business had zero debt and a closing cash balance of US$80.7 million with operating cashflow of US$20.8 million.
In Altium's half-year result its revenue increased by 19% to US$92.8 million and profit before tax rose by 23% to US$31.8 million.
The software company has warned that its revenue will be at the lower end of its guidance for FY20. However, its EBITDA margin continues to grow which adds to Altium's profit.
One of Altium's objectives is to grow its dividend each year, which speaks of the confidence of Altium's leadership that the company can keep growing over the long-term.
Altium is trading at 42x FY21's estimated earnings.
Foolish takeaway
Both of these businesses have excellent long-term outlooks, strong balance sheets and global growth potential. A2 Milk hasn't fallen like Altium has in recent weeks, so Altium would be my preferred opportunistic investment idea. But both could easily beat the market over the next decade.
