Yahoo Finance Is Guangzhou Automobile Group Co Ltd’s (HKG:2238) Balance Sheet Strong Enough To Weather A Storm?
Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Guangzhou Automobile Group Co Ltd (HKG:2238) a safer option. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. However, the key to their continued success lies in its financial health. Today we will look at Guangzhou Automobile Group’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. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into 2238 here. Check out our latest analysis for Guangzhou Automobile Group
How does 2238’s operating cash flow stack up against its debt?
Over the past year, 2238 has reduced its debt from HK$14.94b to HK$10.97b – this includes both the current and long-term debt. With this debt repayment, 2238 currently has HK$50.50b remaining in cash and short-term investments for investing into the business. Moreover, 2238 has generated HK$15.10b in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 137.66%, signalling that 2238’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In 2238’s case, it is able to generate 1.38x cash from its debt capital.
Can 2238 pay its short-term liabilities?
Looking at 2238’s most recent HK$36.74b liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.76x. Usually, for Auto companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is 2238’s debt level acceptable?
With a debt-to-equity ratio of 13.89%, 2238’s debt level may be seen as prudent. 2238 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
2238 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 proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for 2238’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Guangzhou Automobile Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 2238’s future growth? Take a look at our free research report of analyst consensus for 2238’s outlook.
Valuation: What is 2238 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 2238 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.
