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Larry Jewelry International Company Limited (HKG:8351): Time For A Financial Health Check

While small-cap stocks, such as Larry Jewelry International Company Limited (SEHK:8351) with its market cap of HK$1.69B, 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 8351 is loss-making right now, it’s crucial to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into 8351 here.

Does 8351 generate enough cash through operations?

In the previous 12 months, 8351’s rose by about HK$141.5M , which is mainly comprised of near term debt. With this ramp up in debt, 8351’s cash and short-term investments stands at HK$66.0M for investing into the business. Though 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 assess some of 8351’s operating efficiency ratios such as ROA here.

Can 8351 meet its short-term obligations with the cash in hand?

Looking at 8351’s most recent HK$229.7M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of HK$453.4M, with a current ratio of 1.97x. For luxury 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.

SEHK:8351 Historical Debt Jan 5th 18
SEHK:8351 Historical Debt Jan 5th 18

Is 8351’s debt level acceptable?

8351’s level of debt is appropriate relative to its total equity, at 25.08%. 8351 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for 8351, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

Are you a shareholder? Although 8351’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. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Given that 8351’s financial situation may change. I recommend keeping on top of market expectations for 8351’s future growth on our free analysis platform.

Are you a potential investor? 8351’s low-debt position gives it headroom for future growth funding in the future. In addition, its high liquidity ensures the company will continue to operate smoothly should unfavourable circumstances arise. To gain more confidence in the stock, you need to also examine 8351’s track record. I encourage you to continue your research by taking a look at 8351’s past performance analysis on our free platform in order to determine for yourself whether its debt position is justified.


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.

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