Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Yatra Online, Inc. (NASDAQ:YTRA) does have debt on its balance sheet. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.
See our latest analysis for Yatra Online
What Is Yatra Online's Net Debt?
As you can see below, Yatra Online had ₹131.1m of debt at March 2021, down from ₹985.5m a year prior. But it also has ₹2.36b in cash to offset that, meaning it has ₹2.23b net cash.
How Strong Is Yatra Online's Balance Sheet?
The latest balance sheet data shows that Yatra Online had liabilities of ₹3.47b due within a year, and liabilities of ₹1.11b falling due after that. Offsetting this, it had ₹2.36b in cash and ₹1.12b in receivables that were due within 12 months. So it has liabilities totalling ₹1.11b more than its cash and near-term receivables, combined.
Given Yatra Online has a market capitalization of ₹9.54b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Yatra Online also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Yatra Online can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
In the last year Yatra Online had a loss before interest and tax, and actually shrunk its revenue by 82%, to ₹1.3b. That makes us nervous, to say the least.
So How Risky Is Yatra Online?
Although Yatra Online had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₹765m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with Yatra Online , and understanding them should be part of your investment process.
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
If you’re looking to trade Yatra Online, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
About NasdaqCM:YTRA
Yatra Online
Operates as an online travel company in India and internationally.
Flawless balance sheet and overvalued.
