Yahoo Finance Is Bonso Electronics International Inc. (NASDAQ:BNSO) A Financially Sound Company?
Bonso Electronics International Inc. (NASDAQ:BNSO) is a small-cap stock with a market capitalization of US$14m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Companies operating in the Electronic industry, even ones that are profitable, are more likely to be higher risk. Evaluating financial health as part of your investment thesis is essential. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into BNSO here.
How does BNSO’s operating cash flow stack up against its debt?
BNSO has built up its total debt levels in the last twelve months, from US$583k to US$2.8m – this includes long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$8.8m , ready to deploy into the business. Moreover, BNSO has generated cash from operations of US$2.8m during the same period of time, resulting in an operating cash to total debt ratio of 101%, signalling that BNSO’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BNSO’s case, it is able to generate 1.01x cash from its debt capital.
Can BNSO meet its short-term obligations with the cash in hand?
Looking at BNSO’s US$4.4m in current liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$11m, with a current ratio of 2.61x. For Electronic companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does BNSO face the risk of succumbing to its debt-load?
BNSO’s level of debt is appropriate relative to its total equity, at 16%. This range is considered safe as BNSO is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
BNSO has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BNSO’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Bonso Electronics International to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BNSO’s future growth? Take a look at our free research report of analyst consensus for BNSO’s outlook.
Valuation: What is BNSO 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 BNSO is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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