Yahoo Finance Why Great Eagle Holdings Limited (HKG:41) Is A Financially Healthy Company
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Great Eagle Holdings Limited (HKG:41), with a market capitalization of HK$27.79b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine 41’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 41 here. Check out our latest analysis for Great Eagle Holdings
How much cash does 41 generate through its operations?
41’s debt levels surged from HK$28.19b to HK$30.64b over the last 12 months , which is made up of current and long term debt. With this increase in debt, 41 currently has HK$8.88b remaining in cash and short-term investments , ready to deploy into the business. On top of this, 41 has produced cash from operations of HK$2.33b in the last twelve months, resulting in an operating cash to total debt ratio of 7.61%, meaning that 41’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 41’s case, it is able to generate 0.076x cash from its debt capital.
Can 41 meet its short-term obligations with the cash in hand?
With current liabilities at HK$5.83b, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.48x. For Real Estate companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is 41’s debt level acceptable?
With a debt-to-equity ratio of 36.12%, 41’s debt level may be seen as prudent. 41 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can test if 41’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For 41, the ratio of 5.83x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving 41 ample headroom to grow its debt facilities.
Next Steps:
41’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for 41’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Great Eagle Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 41’s future growth? Take a look at our free research report of analyst consensus for 41’s outlook.
Valuation: What is 41 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 41 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.
