TAKE Solutions Limited (NSE:TAKE): Exploring Free Cash Flows

TAKE Solutions Limited (NSE:TAKE) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. This difference directly flows down to how much the stock is worth. Operating in the industry, TAKE Solutions is currently valued at ₹19b. I’ve analysed below, the health and outlook of TAKE Solutions’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio.

See our latest analysis for TAKE Solutions

What is free cash flow?

Free cash flow (FCF) is the amount of cash TAKE Solutions has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations.

There are two methods I will use to evaluate the quality of TAKE Solutions’s FCF: firstly, I will measure its FCF yield relative to the market index yield; secondly, I will examine whether its operating cash flow will continue to grow into the future, which will give us a sense of sustainability.

Free Cash Flow = Operating Cash Flows – Net Capital Expenditure

Free Cash Flow Yield = Free Cash Flow / Enterprise Value

where Enterprise Value = Market Capitalisation + Net Debt

Along with a positive operating cash flow, TAKE Solutions also generates a positive free cash flow. However, the yield of 0.27% is not sufficient to compensate for the level of risk investors are taking on. This is because TAKE Solutions’s yield is well-below the market yield, in addition to serving higher risk compared to the well-diversified market index.

NSEI:TAKE Net Worth December 6th 18
NSEI:TAKE Net Worth December 6th 18

What’s the cash flow outlook for TAKE Solutions?

Can TAKE Solutions improve its operating cash production in the future? Let’s take a quick look at the cash flow trend the company is expected to deliver over time. In the next couple of years, a doubling in growth of operating cash flows is extremely uplifting, especially if capital expenditure grows at a lower rate. Below is a table of TAKE Solutions’s operating cash flow in the past year, as well as the anticipated level going forward.
Current +1 year +2 year
Operating Cash Flow (OCF) ₹1.0b ₹2.2b ₹3.7b
OCF Growth Year-On-Year 115% 65%
OCF Growth From Current Year 255%

Next Steps:

Low free cash flow yield means you are not currently well-compensated for the risk you’re taking on by holding onto TAKE Solutions relative to a well-diversified market index. However, the high growth in operating cash flow may change the tides in the future. Now you know to keep cash flows in mind, You should continue to research TAKE Solutions to get a better picture of the company by looking at:

  1. Valuation: What is TAKE 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 TAKE is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on TAKE Solutions’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.