Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Yangtze River Port and Logistics Limited (NASDAQ:YRIV), with a market cap of US$1.74b, often get neglected by retail investors. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Today we will look at YRIV’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions 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 YRIV here. See our latest analysis for Yangtze River Port and Logistics
How does YRIV’s operating cash flow stack up against its debt?
Over the past year, YRIV has maintained its debt levels at around US$119.22m made up of current and long term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$59.26k for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of YRIV’s operating efficiency ratios such as ROA here.
Can YRIV meet its short-term obligations with the cash in hand?
Looking at YRIV’s most recent US$35.09m liabilities, the company has been able to meet these commitments with a current assets level of US$400.78m, leading to a 11.42x current account ratio. However, a ratio greater than 3x may be considered as too high, as YRIV could be holding too much capital in a low-return investment environment.
Can YRIV service its debt comfortably?
With a debt-to-equity ratio of 60.51%, YRIV can be considered as an above-average leveraged company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. However, since YRIV is presently loss-making, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
YRIV’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. This is only a rough assessment of financial health, and I’m sure YRIV has company-specific issues impacting its capital structure decisions. You should continue to research Yangtze River Port and Logistics to get a more holistic view of the stock by looking at:
- Historical Performance: What has YRIV’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.
- 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.