China Ceramics Co Ltd. (NASDAQ:CCCL): Time For A Financial Health Check
While small-cap stocks, such as China Ceramics Co Ltd. (NASDAQ:CCCL) with its market cap of US$5.72M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since CCCL is loss-making right now, it’s crucial to understand the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, since I only look at basic financial figures, I suggest you dig deeper yourself into CCCL here.
Does CCCL generate an acceptable amount of cash through operations?
CCCL’s debt levels have fallen from CN¥74.04M to CN¥35.63M over the last 12 months , which is mainly comprised of near term debt. With this debt repayment, CCCL currently has CN¥110.00K remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. 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 CCCL’s operating efficiency ratios such as ROA here.
Can CCCL meet its short-term obligations with the cash in hand?
At the current liabilities level of CN¥158.83M liabilities, the company has been able to meet these obligations given the level of current assets of CN¥781.77M, with a current ratio of 4.92x. However, a ratio greater than 3x may be considered as too high, as CCCL could be holding too much capital in a low-return investment environment.
Is CCCL’s debt level acceptable?
With a debt-to-equity ratio of 4.52%, CCCL’s debt level is relatively low. This range is considered safe as CCCL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is virtually non-existent with CCCL, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
Although CCCL’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 an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how CCCL has been performing in the past. I recommend you continue to research China Ceramics to get a better picture of the stock by looking at:
1. Valuation: What is CCCL 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 CCCL is currently mispriced by the market.
2. Historical Performance: What has CCCL’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. 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.
