What You Must Know About Zee Entertainment Enterprises Limited’s (NSE:ZEEL) Financial Strength
Mid-caps stocks, like Zee Entertainment Enterprises Limited (NSEI:ZEEL) with a market capitalization of ₹562.68B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups, primarily due to seasoned executives running a lean corporate structure. I recommend you look at the following hurdles to assess ZEEL’s financial health. Check out our latest analysis for Zee Entertainment Enterprises
Does ZEEL face the risk of succumbing to its debt-load?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. In the case of ZEEL, the debt-to-equity ratio is 27.11%, which means its risk of facing a debt-overhang is very low. While debt-to-equity ratio has several factors at play, an easier way to check whether ZEEL’s leverage is at a sustainable level is to check its ability to service the debt. A company generating earnings (EBIT) at least three times its interest payments is considered financially sound. In ZEEL’s case, its interest is excessively covered by its earnings as the ratio sits at 274.14x. This means lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Does ZEEL’s liquid assets cover its short-term commitments?
Another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. If an adverse event occurs, the company may be forced to pay these immediate expenses with its liquid assets. We need to assess ZEEL’s cash and other liquid assets against its upcoming expenses. Our analysis shows that ZEEL is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.
Next Steps:
Are you a shareholder? ZEEL’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Since ZEEL’s financial position may be different in the future, I recommend exploring market expectations for ZEEL’s future growth on our free analysis platform.
Are you a potential investor? Although understanding the serviceability of debt is important when evaluating which companies are viable investments, it shouldn’t be the deciding factor. After all, debt is often used to fund or accelerate new projects that are expected to improve a company’s growth trajectory in the longer term. ZEEL’s Return on Capital Employed (ROCE) in order to see management’s track record at deploying funds in high-returning projects.
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.
