Zee Media Corporation Limited (NSEI:ZEEMEDIA) is a small-cap stock with a market capitalization of ₹18.03B. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that ZEEMEDIA is not presently profitable, it’s essential to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into ZEEMEDIA here.
How does ZEEMEDIA’s operating cash flow stack up against its debt?
ZEEMEDIA has built up its total debt levels in the last twelve months, from ₹3.85B to ₹4.14B – this includes both the current and long-term debt. With this growth in debt, ZEEMEDIA currently has ₹617.29M remaining in cash and short-term investments for investing into the business. On top of this, ZEEMEDIA has produced cash from operations of ₹950.53M during the same period of time, resulting in an operating cash to total debt ratio of 22.96%, meaning that ZEEMEDIA’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires positive earnings. In ZEEMEDIA’s case, it is able to generate 0.23x cash from its debt capital.
Can ZEEMEDIA meet its short-term obligations with the cash in hand?
Looking at ZEEMEDIA’s most recent ₹2.70B liabilities, the company has been able to meet these commitments with a current assets level of ₹3.17B, leading to a 1.17x current account ratio. Generally, for Media companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can ZEEMEDIA service its debt comfortably?With debt at 15.49% of equity, ZEEMEDIA may be thought of as appropriately levered. This range is considered safe as ZEEMEDIA is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. ZEEMEDIA's risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
ZEEMEDIA’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for ZEEMEDIA's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Zee Media to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ZEEMEDIA’s future growth? Take a look at our free research report of analyst consensus for ZEEMEDIA’s outlook.
- Valuation: What is ZEEMEDIA 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 ZEEMEDIA 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.
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.
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