While small-cap stocks, such as Bharatiya Global Infomedia Limited (NSEI:BGLOBAL) with its market cap of ₹66.70M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. IT companies, especially ones that are currently loss-making, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into BGLOBAL here.
Does BGLOBAL generate an acceptable amount of cash through operations?
BGLOBAL’s debt levels surged from ₹34.77M to ₹43.94M over the last 12 months . With this rise in debt, BGLOBAL currently has ₹5.29M remaining in cash and short-term investments , ready to deploy into the business. On top of this, BGLOBAL has produced ₹21.92M in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 49.88%, signalling that BGLOBAL’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for loss making businesses since metrics such as return on asset (ROA) requires positive earnings. In BGLOBAL’s case, it is able to generate 0.5x cash from its debt capital.
Does BGLOBAL’s liquid assets cover its short-term commitments?
Looking at BGLOBAL’s most recent ₹228.19M liabilities, the company has been able to meet these commitments with a current assets level of ₹416.89M, leading to a 1.83x current account ratio. Generally, for IT companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can BGLOBAL service its debt comfortably?With a debt-to-equity ratio of 5.15%, BGLOBAL’s debt level is relatively low. This range is considered safe as BGLOBAL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for BGLOBAL, and the company also has the ability and headroom to increase debt if needed going forward.
BGLOBAL has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BGLOBAL’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Bharatiya Global Infomedia to get a more holistic view of the stock by looking at:
- 1. Historical Performance: What has BGLOBAL’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.
- 2. 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.