Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Country Garden Services Holdings Company Limited (HKG:6098), with a market cap of HK$31b, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine 6098’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. Don’t forget that this is a general and concentrated examination of Country Garden Services Holdings’s financial health, so you should conduct further analysis into 6098 here.
Can 6098 service its debt comfortably?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. The good news for investors is that Country Garden Services Holdings has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with 6098, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can 6098 pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Country Garden Services Holdings has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at CN¥2.0b, it appears that the company has been able to meet these commitments with a current assets level of CN¥3.7b, leading to a 1.83x current account ratio. For Commercial Services companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
6098 has zero-debt as well as ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and its investors, but some degree of debt may also boost earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure 6098 has company-specific issues impacting its capital structure decisions. I recommend you continue to research Country Garden Services Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 6098’s future growth? Take a look at our free research report of analyst consensus for 6098’s outlook.
- Valuation: What is 6098 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 6098 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 email@example.com.