Yahoo Finance Is Hengan International Group Company Limited’s (HKG:1044) Balance Sheet A Threat To Its Future?
Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Hengan International Group Company Limited (HKG:1044) a safer option. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. However, its financial health remains the key to continued success. This article will examine Hengan International Group’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 1044 here.
See our latest analysis for Hengan International Group
How much cash does 1044 generate through its operations?
1044’s debt levels have fallen from CN¥19.89b to CN¥18.14b over the last 12 months , which comprises of short- and long-term debt. With this debt payback, 1044’s cash and short-term investments stands at CN¥17.90b , ready to deploy into the business. On top of this, 1044 has produced CN¥3.85b in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 21.2%, signalling that 1044’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 1044’s case, it is able to generate 0.21x cash from its debt capital.
Does 1044’s liquid assets cover its short-term commitments?
Looking at 1044’s most recent CN¥18.05b liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.42x. Usually, for Personal Products companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is 1044’s debt level acceptable?
Considering Hengan International Group’s total debt outweighs its equity, the company is deemed highly levered. This isn’t uncommon for large companies because interest payments on debt are tax deductible, meaning debt can be a cheaper source of capital than equity. Accordingly, large companies often have an advantage over small-caps through lower cost of capital due to cheaper financing.
Next Steps:
1044’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. I admit this is a fairly basic analysis for 1044’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Hengan International Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1044’s future growth? Take a look at our free research report of analyst consensus for 1044’s outlook.
Valuation: What is 1044 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 1044 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
