Is Yangtze Optical Fibre And Cable Joint Stock Limited Company (HKG:6869) As Strong As Its Balance Sheet Indicates?
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Yangtze Optical Fibre And Cable Joint Stock Limited Company (HKG:6869) with a market-capitalization of HK$22b, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Today we will look at 6869’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Yangtze Optical Fibre And Cable Limited's financial health, so you should conduct further analysis into 6869 here.
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Does 6869 Produce Much Cash Relative To Its Debt?
6869 has built up its total debt levels in the last twelve months, from CN¥1.0b to CN¥1.4b – this includes long-term debt. With this increase in debt, 6869's cash and short-term investments stands at CN¥2.2b to keep the business going. On top of this, 6869 has produced cash from operations of CN¥452m in the last twelve months, resulting in an operating cash to total debt ratio of 33%, indicating that 6869’s operating cash is sufficient to cover its debt.
Can 6869 pay its short-term liabilities?
At the current liabilities level of CN¥3.4b, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.2x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Communications companies, this is a reasonable ratio since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does 6869 face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 16%, 6869's debt level may be seen as prudent. 6869 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
6869 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 an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for 6869's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Yangtze Optical Fibre And Cable Limited to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 6869’s future growth? Take a look at our free research report of analyst consensus for 6869’s outlook.
Valuation: What is 6869 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 6869 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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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.
