What You Must Know About Industrias Bachoco SAB de CV’s (NYSE:IBA) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Industrias Bachoco SAB de CV (NYSE:IBA), with a market cap of US$2.1b, often get neglected by retail investors. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Let’s take a look at IBA’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into IBA here.
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Does IBA produce enough cash relative to debt?
IBA’s debt level has been constant at around Mex$4.8b over the previous year which accounts for long term debt. At this stable level of debt, IBA’s cash and short-term investments stands at Mex$17b , ready to deploy into the business. Additionally, IBA has generated Mex$2.8b in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 59%, indicating that IBA’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In IBA’s case, it is able to generate 0.59x cash from its debt capital.
Can IBA meet its short-term obligations with the cash in hand?
Looking at IBA’s Mex$8.0b in current liabilities, the company has been able to meet these obligations given the level of current assets of Mex$29b, with a current ratio of 3.55x. However, a ratio greater than 3x may be considered by some to be quite high, however this is not necessarily a negative for the company.
Does IBA face the risk of succumbing to its debt-load?
With debt at 13% of equity, IBA may be thought of as appropriately levered. IBA is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
IBA’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, 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 IBA has been performing in the past. You should continue to research Industrias Bachoco. de to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for IBA’s future growth? Take a look at our free research report of analyst consensus for IBA’s outlook.
Valuation: What is IBA 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 IBA 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.
