Infinite Computer Solutions (India) Limited (NSEI:INFINITE) is a small-cap stock with a market capitalization of ₹16.69B. 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? IT companies, even ones that are profitable, tend to be high risk. Evaluating financial health as part of your investment thesis is essential. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into INFINITE here.
How does INFINITE’s operating cash flow stack up against its debt?
INFINITE has built up its total debt levels in the last twelve months, from ₹695.83M to ₹1.36B . With this increase in debt, the current cash and short-term investment levels stands at ₹2.81B for investing into the business. On top of this, INFINITE has produced ₹886.29M in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 65.10%, signalling that INFINITE’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In INFINITE’s case, it is able to generate 0.65x cash from its debt capital.
Does INFINITE’s liquid assets cover its short-term commitments?
Looking at INFINITE’s most recent ₹9.47B liabilities, it appears that the company has been able to meet these commitments with a current assets level of ₹14.45B, leading to a 1.53x current account ratio. Usually, for IT companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does INFINITE face the risk of succumbing to its debt-load?With a debt-to-equity ratio of 15.76%, INFINITE’s debt level may be seen as prudent. This range is considered safe as INFINITE is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
INFINITE’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. I admit this is a fairly basic analysis for INFINITE’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Infinite Computer Solutions (India) to get a more holistic view of the stock by looking at:
- Valuation: What is INFINITE 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 INFINITE is currently mispriced by the market.
- Historical Performance: What has INFINITE’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.