While small-cap stocks, such as Yangtze River Port and Logistics Limited (NASDAQ:YRIV) with its market cap of US$758.32M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since YRIV is loss-making right now, it’s essential to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, I know these factors are very high-level, so I suggest you dig deeper yourself into YRIV here.
Does YRIV generate enough cash through operations?
YRIV’s debt level has been constant at around US$119.22M over the previous year made up of current and long term debt. At this stable level of debt, YRIV currently has US$59.26K remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of YRIV’s operating efficiency ratios such as ROA here.
Can YRIV pay its short-term liabilities?
Looking at YRIV’s most recent US$35.09M liabilities, the company has been able to meet these obligations given the level of current assets of US$400.78M, with a current ratio of 11.42x. 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.
Does YRIV face the risk of succumbing to its debt-load?YRIV is a relatively highly levered company with a debt-to-equity of 59.84%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since YRIV is presently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
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 exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for YRIV’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Yangtze River Port and Logistics to get a better picture of the stock by looking at:
- 1. 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.
- 2. 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.