Has 51job Inc (NASDAQ:JOBS) Got Enough Cash?
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like 51job Inc (NASDAQ:JOBS), with a market cap of US$3.9b, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. JOBS’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into JOBS here.
Check out our latest analysis for 51job
How much cash does JOBS generate through its operations?
Over the past year, JOBS has ramped up its debt from CN¥1.7b to CN¥2.2b – this includes both the current and long-term debt. With this growth in debt, JOBS’s cash and short-term investments stands at CN¥8.7b for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of JOBS’s operating efficiency ratios such as ROA here.
Can JOBS pay its short-term liabilities?
At the current liabilities level of CN¥4.9b liabilities, the company has been able to meet these commitments with a current assets level of CN¥9.4b, leading to a 1.94x current account ratio. For Professional Services 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 JOBS’s debt level acceptable?
JOBS’s level of debt is appropriate relative to its total equity, at 32%. JOBS is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
Although JOBS’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for JOBS’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research 51job to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for JOBS’s future growth? Take a look at our free research report of analyst consensus for JOBS’s outlook.
Valuation: What is JOBS 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 JOBS 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
