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Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Shenzhou International Group Holdings Limited (HKG:2313). With a market valuation of HK$151.22b, 2313 is a safe haven in times of market uncertainty due to its strong balance sheet. In times of low liquidity in the market, these firms won’t be left high and dry. They are also relatively unaffected by increases in interest rates. Using the most recent data for 2313, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
Check out our latest analysis for Shenzhou International Group Holdings
How does 2313’s operating cash flow stack up against its debt?
2313’s debt level has been constant at around CN¥2.21b over the previous year , which is mainly comprised of near term debt. At this current level of debt, the current cash and short-term investment levels stands at CN¥6.14b 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 take a look at some of 2313’s operating efficiency ratios such as ROA here.
Can 2313 pay its short-term liabilities?
With current liabilities at CN¥4.15b, the company has been able to meet these commitments with a current assets level of CN¥16.11b, leading to a 3.88x current account ratio. However, anything about 3x may be excessive, since 2313 may be leaving too much capital in low-earning investments.
Does 2313 face the risk of succumbing to its debt-load?
2313’s level of debt is appropriate relative to its total equity, at 10.5%. 2313 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
Although 2313’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. This is only a rough assessment of financial health, and I’m sure 2313 has company-specific issues impacting its capital structure decisions. You should continue to research Shenzhou International Group Holdings 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 2313’s future growth? Take a look at our free research report of analyst consensus for 2313’s outlook.
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Valuation: What is 2313 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 2313 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.