CyberTech Systems and Software Limited (NSEI:CYBERTECH) is a small-cap stock with a market capitalization of ₹2.26B. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? IT companies, even ones that are profitable, tend to be high risk. Assessing first and foremost the financial health is crucial. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into CYBERTECH here.
Does CYBERTECH generate an acceptable amount of cash through operations?
CYBERTECH’s debt levels have fallen from ₹107.3M to ₹99.6M over the last 12 months – this includes both the current and long-term debt. With this reduction in debt, CYBERTECH’s cash and short-term investments stands at ₹111.7M , ready to deploy into the business. On top of this, CYBERTECH has generated ₹138.9M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 139.44%, meaning that CYBERTECH’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CYBERTECH’s case, it is able to generate 1.39x cash from its debt capital.
Can CYBERTECH pay its short-term liabilities?
At the current liabilities level of ₹328.4M liabilities, it appears that the company has been able to meet these commitments with a current assets level of ₹471.2M, leading to a 1.43x current account ratio. Generally, for it companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does CYBERTECH face the risk of succumbing to its debt-load?
With debt at 14.01% of equity, CYBERTECH may be thought of as appropriately levered. This range is considered safe as CYBERTECH is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
Are you a shareholder? CYBERTECH’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. Going forward, CYBERTECH’s financial situation may change. I recommend keeping on top of market expectations for CYBERTECH’s future growth on our free analysis platform.