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Investors are always looking for growth in small-cap stocks like Zee Media Corporation Limited (NSEI:ZEEMEDIA), with a market cap of ₹17.11B. However, an important fact which most ignore is: how financially healthy is the business? Since ZEEMEDIA is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into ZEEMEDIA here.
How does ZEEMEDIA’s operating cash flow stack up against its debt?
ZEEMEDIA has built up its total debt levels in the last twelve months, from ₹3.85B to ₹4.14B , which is made up of current and long term debt. With this rise in debt, ZEEMEDIA’s cash and short-term investments stands at ₹617.29M , ready to deploy into the business. Additionally, ZEEMEDIA has generated ₹950.53M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 22.96%, meaning that ZEEMEDIA’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In ZEEMEDIA’s case, it is able to generate 0.23x cash from its debt capital.
Can ZEEMEDIA meet its short-term obligations with the cash in hand?
At the current liabilities level of ₹2.70B liabilities, it appears that the company has been able to meet these obligations given the level of current assets of ₹3.17B, with a current ratio of 1.17x. For Media 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 ZEEMEDIA’s debt level acceptable?
ZEEMEDIA’s level of debt is appropriate relative to its total equity, at 15.49%. ZEEMEDIA is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for ZEEMEDIA, and the company also has the ability and headroom to increase debt if needed going forward.
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ZEEMEDIA’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 proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how ZEEMEDIA has been performing in the past. I recommend you continue to research Zee Media to get a better picture of the stock by looking at: