While small-cap stocks, such as Urja Global Limited (NSEI:URJAGLOBA) with its market cap of ₹2.25B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Semiconductor companies, in particular ones that run negative earnings, tend to be high risk. Assessing first and foremost the financial health is vital. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into URJAGLOBA here.
Does URJAGLOBA generate enough cash through operations?
Over the past year, URJAGLOBA has reduced its debt from ₹67.27M to ₹59.34M , which comprises of short- and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at ₹2.20M , ready to deploy 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 URJAGLOBA’s operating efficiency ratios such as ROA here.
Can URJAGLOBA pay its short-term liabilities?
At the current liabilities level of ₹1.37B liabilities, the company has been able to meet these obligations given the level of current assets of ₹1.38B, with a current ratio of 1.01x. For Semiconductor 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.
Is URJAGLOBA’s debt level acceptable?
URJAGLOBA’s level of debt is low relative to its total equity, at 3.64%. URJAGLOBA is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. URJAGLOBA’s risk around capital structure is almost non-existent, and the company has the headroom and ability to raise debt should it need to in the future.
Next Steps:
URJAGLOBA’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for URJAGLOBA’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Urja Global to get a better picture of the stock by looking at: