Stocks with market capitalization between $2B and $10B, such as ComfortDelGro Corporation Limited (SGX:C52) with a size of SGD4.35B, do not attract as much attention from the investing community as do the small-caps and large-caps. 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’ve put together a small checklist, which I believe provides a ballpark estimate of their financial health status. Check out our latest analysis for ComfortDelGro
Does C52 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. C52’s debt-to-equity ratio stands at 12.07%, which means its debt level does not pose a threat to its operations right now.
Can C52 pay its short-term liabilities?
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. To assess this, I compare C52’s cash and other liquid assets against its upcoming debt. Our analysis shows that C52 does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.
Next Steps:
Are you a shareholder? C52’s relatively safe debt levels is even more impressive due to its ability to generate high cash flow, which illustrates operating efficiency. Since C52’s financial situation could change over time, I recommend exploring market expectations for C52’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. C52’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.