Yahoo Finance Is Techtronic Industries Company Limited (HKG:669) As Strong As Its Balance Sheet Indicates?
With a market capitalization of HK$83b, Techtronic Industries Company Limited (HKG:669) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high liquidity, which means there’s plenty of stocks available to the public for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Using the most recent data for 669, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
View our latest analysis for Techtronic Industries
Want to help shape the future of investing tools? Participate in a short research study and receive a subscription valued at $60.
Does 669 produce enough cash relative to debt?
Over the past year, 669 has reduced its debt from US$1.1b to US$987m , which also accounts for long term debt. With this debt payback, the current cash and short-term investment levels stands at US$1.0b for investing into the business. On top of this, 669 has produced US$685m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 69%, meaning that 669’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In 669’s case, it is able to generate 0.69x cash from its debt capital.
Can 669 meet its short-term obligations with the cash in hand?
At the current liabilities level of US$2.3b, it appears that the company has been able to meet these commitments with a current assets level of US$3.9b, leading to a 1.72x current account ratio. Usually, for Consumer Durables companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is 669’s debt level acceptable?
With a debt-to-equity ratio of 34%, 669’s debt level may be seen as prudent. 669 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can test if 669’s debt levels are sustainable by measuring interest payments against earnings of a company. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In 669’s case, the ratio of 56.61x suggests that interest is amply covered. High interest coverage is seen as a responsible and safe practice, which highlights why most investors believe large-caps such as 669 is a safe investment.
Next Steps:
669 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. This is only a rough assessment of financial health, and I’m sure 669 has company-specific issues impacting its capital structure decisions. I suggest you continue to research Techtronic Industries to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 669’s future growth? Take a look at our free research report of analyst consensus for 669’s outlook.
Valuation: What is 669 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 669 is currently mispriced by the market.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
