Investors are always looking for growth in small-cap stocks like Sicagen India Limited (NSEI:SICAGEN), with a market cap of ₹1.57B. However, an important fact which most ignore is: how financially healthy is the business? Assessing first and foremost the financial health is vital, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. However, I know these factors are very high-level, so I recommend you dig deeper yourself into SICAGEN here.
How does SICAGEN’s operating cash flow stack up against its debt?
SICAGEN has built up its total debt levels in the last twelve months, from ₹604.70M to ₹887.60M , which comprises of short- and long-term debt. With this growth in debt, SICAGEN currently has ₹236.00M remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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 examine some of SICAGEN’s operating efficiency ratios such as ROA here.
Can SICAGEN pay its short-term liabilities?
Looking at SICAGEN’s most recent ₹1.50B liabilities, it seems that the business has been able to meet these commitments with a current assets level of ₹3.05B, leading to a 2.03x current account ratio. For Trade Distributors companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does SICAGEN face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 18.88%, SICAGEN’s debt level may be seen as prudent. SICAGEN is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
SICAGEN’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how SICAGEN has been performing in the past. I recommend you continue to research Sicagen India to get a better picture of the stock by looking at:
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Historical Performance: What has SICAGEN’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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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.