Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6): Financial Strength Analysis
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Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6), with a market cap of S$5.8b, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. BS6’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Don’t forget that this is a general and concentrated examination of Yangzijiang Shipbuilding (Holdings)’s financial health, so you should conduct further analysis into BS6 here.
See our latest analysis for Yangzijiang Shipbuilding (Holdings)
How does BS6’s operating cash flow stack up against its debt?
BS6’s debt levels have fallen from CN¥4.9b to CN¥3.8b over the last 12 months – this includes long-term debt. With this debt repayment, BS6 currently has CN¥18b remaining in cash and short-term investments for investing into the business. On top of this, BS6 has produced cash from operations of CN¥3.0b during the same period of time, resulting in an operating cash to total debt ratio of 79%, indicating that BS6’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BS6’s case, it is able to generate 0.79x cash from its debt capital.
Can BS6 pay its short-term liabilities?
With current liabilities at CN¥11b, the company has been able to meet these obligations given the level of current assets of CN¥29b, with a current ratio of 2.53x. For Machinery 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.
Is BS6’s debt level acceptable?
With debt at 14% of equity, BS6 may be thought of as appropriately levered. BS6 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
BS6 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for BS6’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Yangzijiang Shipbuilding (Holdings) to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BS6’s future growth? Take a look at our free research report of analyst consensus for BS6’s outlook.
Valuation: What is BS6 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 BS6 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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
