Kingdee International Software Group Company Limited (HKG:268): Financial Strength Analysis
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Kingdee International Software Group Company Limited (HKG:268) with a market-capitalization of HK$27b, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. 268’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into 268 here.
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Does 268 Produce Much Cash Relative To Its Debt?
268's debt levels have fallen from CN¥1.3b to CN¥301m over the last 12 months , which also accounts for long term debt. With this reduction in debt, 268's cash and short-term investments stands at CN¥2.0b to keep the business going. On top of this, 268 has generated cash from operations of CN¥906m during the same period of time, leading to an operating cash to total debt ratio of 301%, signalling that 268’s operating cash is sufficient to cover its debt.
Can 268 pay its short-term liabilities?
With current liabilities at CN¥1.9b, the company has been able to meet these commitments with a current assets level of CN¥3.2b, leading to a 1.69x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Software companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is 268’s debt level acceptable?
With a debt-to-equity ratio of 5.4%, 268's debt level is relatively low. 268 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
268 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for 268's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Kingdee International Software Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 268’s future growth? Take a look at our free research report of analyst consensus for 268’s outlook.
Valuation: What is 268 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 268 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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