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Investors are always looking for growth in small-cap stocks like Camsing Healthcare Limited (SGX:BAC), with a market cap of S$26.40M. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into BAC here.
Does BAC generate an acceptable amount of cash through operations?
Over the past year, BAC has reduced its debt from S$4.26M to S$3.44M . With this reduction in debt, BAC currently has S$5.09M remaining in cash and short-term investments for investing into the business. Moreover, BAC has generated S$946.00K in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 27.49%, indicating that BAC’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 BAC’s case, it is able to generate 0.27x cash from its debt capital.
Does BAC’s liquid assets cover its short-term commitments?
With current liabilities at S$4.47M, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.85x. For Retail Distributors 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.
Can BAC service its debt comfortably?
With a debt-to-equity ratio of 31.15%, BAC’s debt level may be seen as prudent. This range is considered safe as BAC is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
Next Steps:
BAC’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, 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 BAC’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Camsing Healthcare to get a more holistic view of the stock by looking at:
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1. Historical Performance: What has BAC’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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2. 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.