Yahoo Finance Is CITIC Envirotech Ltd’s (SGX:CEE) Balance Sheet Strong Enough To Weather A Storm?
Investors are always looking for growth in small-cap stocks like CITIC Envirotech Ltd (SGX:CEE), with a market cap of S$1.31B. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I recommend you dig deeper yourself into CEE here.
Does CEE generate an acceptable amount of cash through operations?
CEE has built up its total debt levels in the last twelve months, from S$557.15M to S$809.71M – this includes both the current and long-term debt. With this increase in debt, CEE currently has S$631.30M remaining in cash and short-term investments , ready to deploy into the business. On top of this, CEE has produced S$225.10M in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 27.80%, meaning that CEE’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CEE’s case, it is able to generate 0.28x cash from its debt capital.
Can CEE pay its short-term liabilities?
At the current liabilities level of S$1.33B liabilities, the company has not been able to meet these commitments with a current assets level of S$1.19B, leading to a 0.9x current account ratio. which is under the appropriate industry ratio of 3x.
Can CEE service its debt comfortably?
CEE’s level of debt is appropriate relative to its total equity, at 39.36%. This range is considered safe as CEE is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether CEE is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In CEE’s, case, the ratio of 7.55x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving CEE ample headroom to grow its debt facilities.
Next Steps:
CEE’s debt level is appropriate for a company its size. Furthermore, it is able to generate sufficient cash flow coverage, meaning it is able to put its debt in good use. Though its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. Keep in mind I haven’t considered other factors such as how CEE has been performing in the past. I suggest you continue to research CITIC Envirotech to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CEE’s future growth? Take a look at our free research report of analyst consensus for CEE’s outlook.
Valuation: What is CEE 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 CEE 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.
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.
