Mid-caps stocks, like Tsim Sha Tsui Properties Limited (SEHK:247) with a market capitalization of HK$44.67B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups, primarily due to seasoned executives running a lean corporate structure. I will take you through a few basic checks to assess the financial health of companies with no debt. Check out our latest analysis for Tsim Sha Tsui Properties
Can 247 service its debt comfortably?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. For 247, the debt-to-equity ratio is 6.54%, which means debt is low and does not pose any significant threat to the company’s operations.
Can 247 pay its short-term liabilities?
Debt to equity ratio is an important aspect of financial strength. But if the company has a substantial amount of cash on its balance sheet, that should allay some fear of a debt overhang and increase the chance of meeting upcoming liabilities. We need to assess 247’s cash and other liquid assets against its upcoming expenses. Our analysis shows that 247 is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.
Next Steps:
Are you a shareholder? Although 247’s debt level is relatively low, it has the ability to efficiently utilise its borrowings to generate ample cash flow coverage. Since 247’s financial situation may change over time, I suggest assessing market expectations for 247’s future growth on our free analysis platform.
Are you a potential investor? Although investors should analyse the serviceability of debt, it shouldn’t be viewed in isolation of other factors. Ultimately, debt is often used to fund or accelerate new projects that are expected to improve a company’s growth trajectory in the longer term. 247’s Return on Capital Employed (ROCE) in order to see management’s track record at deploying funds in high-returning projects.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.