Yahoo Finance Is Multi-Chem Limited (SGX:AWZ) A Financially Sound Company?
While small-cap stocks, such as Multi-Chem Limited (SGX:AWZ) with its market cap of S$81.99m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Electronic companies, even ones that are profitable, tend to be high risk. Evaluating financial health as part of your investment thesis is crucial. Here are few basic financial health checks you should consider before taking the plunge. Though, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into AWZ here.
How does AWZ’s operating cash flow stack up against its debt?
Over the past year, AWZ has ramped up its debt from S$11.57m to S$25.71m , which comprises of short- and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at S$77.26m for investing into the business. On top of this, AWZ has produced S$12.03m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 46.79%, indicating that AWZ’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In AWZ’s case, it is able to generate 0.47x cash from its debt capital.
Does AWZ’s liquid assets cover its short-term commitments?
At the current liabilities level of S$117.33m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of S$211.39m, with a current ratio of 1.8x. For Electronic companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Does AWZ face the risk of succumbing to its debt-load?
AWZ’s level of debt is appropriate relative to its total equity, at 23.21%. AWZ is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
AWZ’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure AWZ has company-specific issues impacting its capital structure decisions. You should continue to research Multi-Chem to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AWZ’s future growth? Take a look at our free research report of analyst consensus for AWZ’s outlook.
Valuation: What is AWZ 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 AWZ 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.
