For quite a while, I have thought shares in Trainline (LSE: TRN) looked cheap. To me, the Trainline share price has been undervaluing the business’s strong cash flow generation while overestimating the potential impact from a putative government-backed rival.

Wednesday (6 May) saw the company publish its annual results, so what do they tell us about the state of the business?

Earnings growth was strong

At a high level of detail, I reckon Trainline’s results were solid. Revenue grew, albeit by only 2%. Operating profit jumped 43%, EBITDA (earnings before interest, tax, deprecation and amortisation) was up 11% and basic earnings per share soared 48%.

Drilling down into the details though, I did see some areas of concern. One was that the UK consumer business – the company’s largest operating division – saw revenues decline 2%.

Small though that may seem, this is an alarming development as it may suggest that Trainline is losing ground to rivals such as Uber (with its own train travel booking option) and contactless card use.

Another was a decline in adjusted free cash flow. This fell 9%, to £66m. That is still substantial for the company given its £840m market capitalisation. It pinned the fall on the timing of working capital movements.

Still, with bears already doubting the long-term growth prospects for Trainline, a near-double-digit fall in adjusted free cash flow does not look good.

The business model continues to generate money

UK consumer sales revenues fell, but the number of tickets the division sold actually increased. That suggests that Trainline is reducing average revenue per ticket. That might help it fight competitors but it could eat into profit margins.

Meanwhile, the international consumer arm and business-to-business solutions division both reported revenue growth. I see that as positive.

Trainline has spent decades building its technology. Rolling it out more widely both helps to get more return on those sunk costs, as well as diversifying the business so that if the UK government does launch its own ticketing service, the overall impact will be somewhat mitigated.

The basic model here seems attractive to me and I think it has legs. I remain unconvinced the government will launch its rival any time soon – if ever. Even if it does, Trainline has a formidable lead in everything from technological development to customer awareness.

I still think this looks cheap

I was not a fan of the growth in the company’s net debt, to £170m. However, Trainline spent £147m buying back its own shares. Given that I think the Trainline share price looks cheap, that could prove to be a wise buy over the long term.

Adding the net debt and market-cap together, the enterprise value now stands at just over £1.0bn. That is around 7 times cash generated from operations. To me that looks cheap for a business of this quality that has ongoing growth opportunities.

The City sees things differently. As I write this on Wednesday morning, the Trainline share price is down 8% in early trading. It has fallen 21% in the past year. I think it looks too cheap and plan to hang on to my shares for the long term.