Stocks with market capitalization between $2B and $10B, such as Chongqing Iron & Steel Company Limited (SEHK:1053) with a size of HK$25.99B, do not attract as much attention from the investing community as do the small-caps and large-caps. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Let’s take a look at 1053’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into 1053 here. Check out our latest analysis for Chongqing Iron & Steel

How does 1053’s operating cash flow stack up against its debt?

Over the past year, 1053 has reduced its debt from CN¥19.12B to CN¥3.50B , which comprises of short- and long-term debt. With this debt repayment, 1053’s cash and short-term investments stands at CN¥2.70B for investing into the business. On top of this, 1053 has generated cash from operations of CN¥505.82M during the same period of time, resulting in an operating cash to total debt ratio of 14.45%, indicating that 1053’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In 1053’s case, it is able to generate 0.14x cash from its debt capital.

Does 1053’s liquid assets cover its short-term commitments?

At the current liabilities level of CN¥4.81B liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.99x, which is below the prudent industry ratio of 3x.

Can 1053 service its debt comfortably?

With a debt-to-equity ratio of 20.83%, 1053’s debt level may be seen as prudent. 1053 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.

Next Steps:

Although 1053’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. In addition to this, its lack of liquidity raises questions over current asset management practices for the mid-cap. This is only a rough assessment of financial health, and I’m sure 1053 has company-specific issues impacting its capital structure decisions. I recommend you continue to research Chongqing Iron & Steel to get a better picture of the stock by looking at: