What You Must Know About YY Inc's (NASDAQ:YY) Financial Health

Mid-caps stocks, like YY Inc (NASDAQ:YY) with a market capitalization of US$6.05B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine YY’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into YY here. See our latest analysis for YY

Does YY generate enough cash through operations?

YY's debt levels have fallen from CN¥2.77B to CN¥594.77M over the last 12 months , which comprises of short- and long-term debt. With this debt payback, YY currently has CN¥8.74B remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn't be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can examine some of YY’s operating efficiency ratios such as ROA here.

Does YY’s liquid assets cover its short-term commitments?

At the current liabilities level of CN¥3.15B liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.22x. However, anything about 3x may be excessive, since YY may be leaving too much capital in low-earning investments.

Does YY face the risk of succumbing to its debt-load?

YY’s level of debt is low relative to its total equity, at 5.55%. This range is considered safe as YY is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.

Next Steps:

YY’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, 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 YY's financial health. Other important fundamentals need to be considered alongside. You should continue to research YY to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for YY’s future growth? Take a look at our free research report of analyst consensus for YY’s outlook.
2. Valuation: What is YY 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 YY is currently mispriced by the market.
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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.