Why L&T Technology Services Limited (NSE:LTTS) Is A Financially Healthy Company

Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like L&T Technology Services Limited (NSEI:LTTS), with a market cap of ₹135.70B, are often out of the spotlight. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. LTTS’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into LTTS here. View our latest analysis for L&T Technology Services

Does LTTS generate enough cash through operations?

Over the past year, LTTS has reduced its debt from ₹1.96B to ₹1.02B , which is mainly comprised of near term debt. With this debt repayment, LTTS's cash and short-term investments stands at ₹2.62B for investing into the business. Moreover, LTTS has produced ₹3.84B in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 376.94%, indicating that LTTS’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In LTTS’s case, it is able to generate 3.77x cash from its debt capital.

Can LTTS meet its short-term obligations with the cash in hand?

With current liabilities at ₹6.67B, the company has been able to meet these commitments with a current assets level of ₹14.72B, leading to a 2.21x current account ratio. For Professional Services companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too capital in low return investments.

Does LTTS face the risk of succumbing to its debt-load?

With debt at 7.64% of equity, LTTS may be thought of as having low leverage. LTTS is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.

Next Steps:

LTTS’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 will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how LTTS has been performing in the past. I suggest you continue to research L&T Technology Services to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for LTTS’s future growth? Take a look at our free research report of analyst consensus for LTTS’s outlook.
2. Valuation: What is LTTS 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 LTTS is currently mispriced by the market.
3. 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.