While small-cap stocks, such as TV18 Broadcast Limited (NSE:TV18BRDCST) with its market cap of ₹98.75b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Evaluating financial health as part of your investment thesis is vital, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into TV18BRDCST here.
Does TV18BRDCST produce enough cash relative to debt?
TV18BRDCST has built up its total debt levels in the last twelve months, from ₹2.73b to ₹0 , which is made up of current and long term debt. With this increase in debt, TV18BRDCST currently has ₹2.73b remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can examine some of TV18BRDCST’s operating efficiency ratios such as ROA here.
Can TV18BRDCST meet its short-term obligations with the cash in hand?
Looking at TV18BRDCST’s most recent ₹27.18b liabilities, it seems that the business has been able to meet these commitments with a current assets level of ₹35.86b, leading to a 1.32x current account ratio. Usually, for Media 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 TV18BRDCST’s debt level acceptable?With a debt-to-equity ratio of 25.01%, TV18BRDCST’s debt level may be seen as prudent. This range is considered safe as TV18BRDCST is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
TV18BRDCST’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 proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how TV18BRDCST has been performing in the past. I recommend you continue to research TV18 Broadcast to get a better picture of the stock by looking at:
- Historical Performance: What has TV18BRDCST’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.