Stocks with market capitalization between $2B and $10B, such as SATS Ltd (SGX:S58) with a size of S$5.80B, do not attract as much attention from the investing community as do the small-caps and large-caps. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine S58’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into S58 here. View our latest analysis for SATS
Does S58 generate enough cash through operations?
S58’s debt level has been constant at around S$108.63M over the previous year – this includes both the current and long-term debt. At this constant level of debt, S58’s cash and short-term investments stands at S$505.80M for investing into the business. Moreover, S58 has generated cash from operations of S$308.92M in the last twelve months, resulting in an operating cash to total debt ratio of 284.39%, signalling that S58’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In S58’s case, it is able to generate 2.84x cash from its debt capital.
Does S58’s liquid assets cover its short-term commitments?
With current liabilities at S$409.90M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.09x. Generally, for Infrastructure 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.
Is S58’s debt level acceptable?
With a debt-to-equity ratio of 6.12%, S58’s debt level is relatively low. This range is considered safe as S58 is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
S58 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 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 S58’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research SATS to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for S58’s future growth? Take a look at our free research report of analyst consensus for S58’s outlook.
- Valuation: What is S58 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 S58 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.