What does Alibaba Group Holding Limited's (NYSE:BABA) Balance Sheet Tell Us About Its Future?

Investors pursuing a solid, dependable stock investment can often be led to Alibaba Group Holding Limited (NYSE:BABA), a large-cap worth US$465.59B. One reason being its ‘too big to fail’ aura which gives it the appearance of a strong and stable investment. However, the key to extending previous success is in the health of the company’s financials. I will provide an overview of Alibaba Group Holding’s financial liquidity and leverage to give you an idea of Alibaba Group Holding’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into BABA here. View our latest analysis for Alibaba Group Holding

Does BABA produce enough cash relative to debt?

BABA's debt levels surged from CN¥57.57B to CN¥91.73B over the last 12 months , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at CN¥150.80B for investing into the business. Moreover, BABA has generated cash from operations of CN¥80.33B in the last twelve months, resulting in an operating cash to total debt ratio of 87.57%, meaning that BABA’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BABA’s case, it is able to generate 0.88x cash from its debt capital.

Can BABA meet its short-term obligations with the cash in hand?

At the current liabilities level of CN¥93.77B liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.95x. For Internet companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Can BABA service its debt comfortably?

BABA’s level of debt is appropriate relative to its total equity, at 30.29%. This range is considered safe as BABA is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.

Next Steps:

BABA has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven't considered other factors such as how BABA has been performing in the past. I recommend you continue to research Alibaba Group Holding to get a more holistic view of the stock by looking at:

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