Yahoo Finance What does Neo Telemedia Limited’s (HKG:8167) Balance Sheet Tell Us About Its Future?
Neo Telemedia Limited (HKG:8167) is a small-cap stock with a market capitalization of HK$2.29b. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Companies operating in the Electronic industry, even ones that are profitable, are inclined towards being higher risk. Evaluating financial health as part of your investment thesis is vital. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into 8167 here.
Does 8167 produce enough cash relative to debt?
Over the past year, 8167 has ramped up its debt from HK$83.22m to HK$119.80m . With this growth in debt, the current cash and short-term investment levels stands at HK$246.10m for investing into the business. Moreover, 8167 has produced HK$170.63m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 142.43%, signalling that 8167’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 8167’s case, it is able to generate 1.42x cash from its debt capital.
Does 8167’s liquid assets cover its short-term commitments?
With current liabilities at HK$792.89m, it seems that the business has been able to meet these commitments with a current assets level of HK$1.31b, leading to a 1.66x current account ratio. Usually, for Electronic companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does 8167 face the risk of succumbing to its debt-load?
8167’s level of debt is low relative to its total equity, at 7.28%. 8167 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
8167’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure 8167 has company-specific issues impacting its capital structure decisions. I recommend you continue to research Neo Telemedia to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 8167’s future growth? Take a look at our free research report of analyst consensus for 8167’s outlook.
Valuation: What is 8167 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 8167 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.
