Stocks with market capitalization between $2B and $10B, such as Endurance Technologies Limited (NSE:ENDURANCE) with a size of ₹183.27b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. ENDURANCE’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into ENDURANCE here. Check out our latest analysis for Endurance Technologies

How much cash does ENDURANCE generate through its operations?

ENDURANCE has built up its total debt levels in the last twelve months, from ₹6.94b to ₹0 – this includes both the current and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at ₹5.49b for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of ENDURANCE’s operating efficiency ratios such as ROA here.

Can ENDURANCE pay its short-term liabilities?

With current liabilities at ₹17.57b, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.22x. Generally, for Auto Components companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Is ENDURANCE’s debt level acceptable?

ENDURANCE is a relatively highly levered company with a debt-to-equity of 40.92%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if ENDURANCE’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For ENDURANCE, the ratio of 25.77x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.