Are Want Want China Holdings Limited’s (HKG:151) Interest Costs Too High?
Mid-caps stocks, like Want Want China Holdings Limited (SEHK:151) with a market capitalization of HK$77.03B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at 151’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 151 here. Check out our latest analysis for Want Want China Holdings
Does 151 generate enough cash through operations?
151 has built up its total debt levels in the last twelve months, from CN¥8.16B to CN¥9.90B , which is made up of current and long term debt. With this growth in debt, 151 currently has CN¥12.52B remaining in cash and short-term investments , ready to deploy into the business. Additionally, 151 has generated cash from operations of CN¥5.11B over the same time period, resulting in an operating cash to total debt ratio of 51.58%, indicating that 151’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 151’s case, it is able to generate 0.52x cash from its debt capital.
Can 151 meet its short-term obligations with the cash in hand?
Looking at 151’s most recent CN¥8.77B liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.93x. Usually, for Food companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Is 151’s debt level acceptable?
151 is a relatively highly levered company with a debt-to-equity of 57.08%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
151’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Since there is also no concerns around 151’s liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I’m sure 151 has company-specific issues impacting its capital structure decisions. I recommend you continue to research Want Want China Holdings to get a better picture of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for 151’s future growth? Take a look at our free research report of analyst consensus for 151’s outlook.
Valuation: What is 151 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 151 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 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.
