Yahoo Finance Is NagaCorp Ltd (HKG:3918) A Financially Strong Company?
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as NagaCorp Ltd (SEHK:3918), with a market capitalization of HK$33.17B, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at 3918’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into 3918 here. View our latest analysis for NagaCorp
Does 3918 face the risk of succumbing to its debt-load?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. The good news for investors is that NagaCorp has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with 3918, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can 3918 meet its short-term obligations with the cash in hand?
Since NagaCorp doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of US$79.73M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$156.01M, with a current ratio of 1.96x. Generally, for Hospitality companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Next Steps:
3918 has no debt in addition to ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, but some level of debt could also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for 3918’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research NagaCorp to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 3918’s future growth? Take a look at our free research report of analyst consensus for 3918’s outlook.
Historical Performance: What has 3918’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
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.
