All You Need To Know About ACC Limited’s (NSE:ACC) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as ACC Limited (NSE:ACC), with a market cap of ₹291.7b, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at ACC’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into ACC here.
Check out our latest analysis for ACC
Is ACC’s debt level acceptable?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For ACC, the debt-to-equity ratio is zero, meaning that the company has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with ACC, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can ACC meet its short-term obligations with the cash in hand?
Since ACC doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at ₹46.4b, it appears that the company has been able to meet these obligations given the level of current assets of ₹58.0b, with a current ratio of 1.25x. For Basic Materials companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Next Steps:
ACC has zero-debt in addition to ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and shareholders, but some degree of debt may also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for ACC’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research ACC to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ACC’s future growth? Take a look at our free research report of analyst consensus for ACC’s outlook.
Valuation: What is ACC 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 ACC 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.
