Yahoo Finance How Financially Strong Is Asia Pacific Wire & Cable Corporation Limited (NASDAQ:APWC)?
While small-cap stocks, such as Asia Pacific Wire & Cable Corporation Limited (NASDAQ:APWC) with its market cap of US$35.24m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. Though, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into APWC here.
How does APWC’s operating cash flow stack up against its debt?
APWC has built up its total debt levels in the last twelve months, from US$28.31m to US$0 . With this increase in debt, the current cash and short-term investment levels stands at US$46.09m , 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. 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 APWC’s operating efficiency ratios such as ROA here.
Can APWC meet its short-term obligations with the cash in hand?
Looking at APWC’s most recent US$101.28m liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$283.03m, leading to a 2.79x current account ratio. Usually, for Electrical companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can APWC service its debt comfortably?
With a debt-to-equity ratio of 15.11%, APWC’s debt level may be seen as prudent. This range is considered safe as APWC is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether APWC is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In APWC’s, case, the ratio of 119x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as APWC’s high interest coverage is seen as responsible and safe practice.
Next Steps:
APWC’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. Keep in mind I haven’t considered other factors such as how APWC has been performing in the past. I suggest you continue to research Asia Pacific Wire & Cable to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for APWC’s future growth? Take a look at our free research report of analyst consensus for APWC’s outlook.
Historical Performance: What has APWC’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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.