Yahoo Finance Is Fang Holdings Limited (NYSE:SFUN) A Financially Sound Company?
While small-cap stocks, such as Fang Holdings Limited (NYSE:SFUN) with its market cap of US$1.84b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Internet industry, even ones that are profitable, are inclined towards being higher risk. So, understanding the company’s financial health becomes crucial. Here are few basic financial health checks you should consider before taking the plunge. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into SFUN here.
How does SFUN’s operating cash flow stack up against its debt?
Over the past year, SFUN has ramped up its debt from US$573.19m to US$648.16m , which is made up of current and long term debt. With this increase in debt, the current cash and short-term investment levels stands at US$284.08m , ready to deploy into the business. On top of this, SFUN has generated cash from operations of US$126.89m in the last twelve months, resulting in an operating cash to total debt ratio of 19.58%, indicating that SFUN’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In SFUN’s case, it is able to generate 0.2x cash from its debt capital.
Can SFUN meet its short-term obligations with the cash in hand?
Looking at SFUN’s most recent US$581.81m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$748.41m, with a current ratio of 1.29x. Generally, for Internet companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does SFUN face the risk of succumbing to its debt-load?
SFUN is a relatively highly levered company with a debt-to-equity of 87.56%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
SFUN’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for SFUN’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Fang Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SFUN’s future growth? Take a look at our free research report of analyst consensus for SFUN’s outlook.
Valuation: What is SFUN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SFUN is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
