Advertisement
U.S. markets open in 4 hours 40 minutes
  • S&P Futures

    5,211.00
    -3.75 (-0.07%)
     
  • Dow Futures

    39,222.00
    -1.00 (-0.00%)
     
  • Nasdaq Futures

    18,203.75
    -27.75 (-0.15%)
     
  • Russell 2000 Futures

    2,046.40
    -3.40 (-0.17%)
     
  • Crude Oil

    82.50
    -0.22 (-0.27%)
     
  • Gold

    2,151.40
    -12.90 (-0.60%)
     
  • Silver

    25.00
    -0.26 (-1.05%)
     
  • EUR/USD

    1.0850
    -0.0027 (-0.25%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.48
    +0.15 (+1.05%)
     
  • GBP/USD

    1.2691
    -0.0038 (-0.30%)
     
  • USD/JPY

    150.4190
    +1.3210 (+0.89%)
     
  • Bitcoin USD

    63,484.92
    -4,296.45 (-6.34%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,726.15
    +3.60 (+0.05%)
     
  • Nikkei 225

    40,003.60
    +263.20 (+0.66%)
     

What does Symphony Holdings Limited’s (HKG:1223) Balance Sheet Tell Us About Its Future?

Investors are always looking for growth in small-cap stocks like Symphony Holdings Limited (HKG:1223), with a market cap of HK$3.09b. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Specialty Retail industry facing headwinds from current disruption, even ones that are profitable, are more likely to be higher risk. Assessing first and foremost the financial health is essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, this commentary is still very high-level, so I suggest you dig deeper yourself into 1223 here.

How much cash does 1223 generate through its operations?

Over the past year, 1223 has maintained its debt levels at around HK$1.18b comprising of short- and long-term debt. At this constant level of debt, 1223 currently has HK$115.4m 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. For this article’s sake, I won’t be looking at this today, but you can examine some of 1223’s operating efficiency ratios such as ROA here.

Does 1223’s liquid assets cover its short-term commitments?

With current liabilities at HK$1.08b, it appears that the company has been able to meet these obligations given the level of current assets of HK$1.46b, with a current ratio of 1.36x. Usually, for Specialty Retail companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.

SEHK:1223 Historical Debt September 8th 18
SEHK:1223 Historical Debt September 8th 18

Can 1223 service its debt comfortably?

With a debt-to-equity ratio of 46.0%, 1223 can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.

Next Steps:

1223’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how 1223 has been performing in the past. I recommend you continue to research Symphony Holdings to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 1223’s future growth? Take a look at our free research report of analyst consensus for 1223’s outlook.

  2. Valuation: What is 1223 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 1223 is currently mispriced by the market.

  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 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.

Advertisement