While small-cap stocks, such as Public Joint-Stock Company TNS energo Rostov-on-Don (MISX:RTSB) with its market cap of RUРУБ2.82B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into RTSB here.
Does RTSB generate enough cash through operations?
RTSB’s debt levels surged from RUРУБ4.90B to RUРУБ5.20B over the last 12 months – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at RUРУБ310.90M , ready to deploy into the business. Moreover, RTSB has generated RUРУБ629.36M in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 12.10%, indicating that RTSB’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In RTSB’s case, it is able to generate 0.12x cash from its debt capital.
Can RTSB pay its short-term liabilities?
With current liabilities at RUРУБ11.78B, it seems that the business has been able to meet these commitments with a current assets level of RUРУБ12.18B, leading to a 1.03x current account ratio. For Electric Utilities companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can RTSB service its debt comfortably?
With total debt exceeding equities, RTSB is considered a highly levered company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses.Next Steps:
RTSB’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, 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 RTSB’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research TNS energo Rostov-on-Don to get a better picture of the stock by looking at:
- 1. Valuation: What is RTSB 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 RTSB is currently mispriced by the market.
- 2. Historical Performance: What has RTSB’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.
- 3. 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.