In This Article:
TTK Prestige Limited (NSE:TTKPRESTIG) is a small-cap stock with a market capitalization of ₹93b. 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? Companies operating in the Consumer Durables industry facing headwinds from current disruption, even ones that are profitable, tend to be high risk. So, understanding the company’s financial health becomes vital. Here are few basic financial health checks you should consider before taking the plunge. Though, this commentary is still very high-level, so I recommend you dig deeper yourself into TTKPRESTIG here.
How does TTKPRESTIG’s operating cash flow stack up against its debt?
Over the past year, TTKPRESTIG has ramped up its debt from ₹1.1b to ₹1.3b , which includes long-term debt. With this increase in debt, TTKPRESTIG currently has ₹2.4b remaining in cash and short-term investments , ready to deploy into the business. On top of this, TTKPRESTIG has produced cash from operations of ₹1.3b over the same time period, leading to an operating cash to total debt ratio of 98%, meaning that TTKPRESTIG’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In TTKPRESTIG’s case, it is able to generate 0.98x cash from its debt capital.
Does TTKPRESTIG’s liquid assets cover its short-term commitments?
At the current liabilities level of ₹4.1b, the company has been able to meet these commitments with a current assets level of ₹10b, leading to a 2.55x current account ratio. Usually, for Consumer Durables companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is TTKPRESTIG’s debt level acceptable?
TTKPRESTIG’s level of debt is appropriate relative to its total equity, at 13%. This range is considered safe as TTKPRESTIG is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
Next Steps:
TTKPRESTIG’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 proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for TTKPRESTIG’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research TTK Prestige to get a more holistic view of the stock by looking at: