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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Venture Corporation Limited (SGX:V03) with a market-capitalization of S$4.2b, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. V03’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into V03 here.
Check out our latest analysis for Venture
How does V03’s operating cash flow stack up against its debt?
V03’s debt levels have fallen from S$65m to S$42m over the last 12 months made up of predominantly near term debt. With this reduction in debt, V03 currently has S$740m remaining in cash and short-term investments for investing into the business. Additionally, V03 has generated S$401m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 945%, indicating that V03’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In V03’s case, it is able to generate 9.45x cash from its debt capital.
Can V03 meet its short-term obligations with the cash in hand?
With current liabilities at S$852m, it seems that the business has been able to meet these commitments with a current assets level of S$2.2b, leading to a 2.58x current account ratio. For Electronic companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too much capital in low return investments.
Can V03 service its debt comfortably?
V03’s level of debt is low relative to its total equity, at 1.9%. V03 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
V03 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure V03 has company-specific issues impacting its capital structure decisions. You should continue to research Venture to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for V03’s future growth? Take a look at our free research report of analyst consensus for V03’s outlook.
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Valuation: What is V03 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 V03 is currently mispriced by the market.
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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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.