Shenzhou International Group Holdings Limited (HKG:2313): Financial Strength Analysis
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Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Shenzhou International Group Holdings Limited (HKG:2313). With a market valuation of HK$146b, 2313 is a safe haven in times of market uncertainty due to its strong balance sheet. In times of low liquidity in the market, these firms won’t be left high and dry. They are also relatively unaffected by increases in interest rates. Today I will analyse the latest financial data for 2313 to determine is solvency and liquidity and whether the stock is a sound investment.
View our latest analysis for Shenzhou International Group Holdings
Does 2313 Produce Much Cash Relative To Its Debt?
Over the past year, 2313 has ramped up its debt from CN¥2.1b to CN¥2.5b , which includes long-term debt. With this rise in debt, 2313 currently has CN¥8.2b remaining in cash and short-term investments to keep the business going. On top of this, 2313 has generated CN¥4.1b in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 164%, signalling that 2313’s current level of operating cash is high enough to cover debt.
Can 2313 meet its short-term obligations with the cash in hand?
Looking at 2313’s CN¥4.9b in current liabilities, the company has been able to meet these obligations given the level of current assets of CN¥18b, with a current ratio of 3.69x. The current ratio is the number you get when you divide current assets by current liabilities. However, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.
Can 2313 service its debt comfortably?
With debt at 11% of equity, 2313 may be thought of as appropriately levered. 2313 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
2313 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn't a big surprise for a large-cap. I admit this is a fairly basic analysis for 2313's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Shenzhou International Group Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 2313’s future growth? Take a look at our free research report of analyst consensus for 2313’s outlook.
Valuation: What is 2313 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 2313 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
