Yahoo Finance What does BEST Inc.'s (NYSE:BEST) Balance Sheet Tell Us About Its Future?
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Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as BEST Inc. (NYSE:BEST), with a market cap of US$2.2b, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine BEST’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending 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 BEST here.
View our latest analysis for BEST
Does BEST Produce Much Cash Relative To Its Debt?
Over the past year, BEST has ramped up its debt from CN¥1.2b to CN¥1.8b , which is mainly comprised of near term debt. With this rise in debt, BEST currently has CN¥2.6b remaining in cash and short-term investments to keep the business going. Additionally, BEST has generated cash from operations of CN¥637m during the same period of time, resulting in an operating cash to total debt ratio of 36%, signalling that BEST’s operating cash is sufficient to cover its debt.
Does BEST’s liquid assets cover its short-term commitments?
At the current liabilities level of CN¥8.1b, it appears that the company may not have an easy time meeting these commitments with a current assets level of CN¥7.8b, leading to a current ratio of 0.97x. The current ratio is calculated by dividing current assets by current liabilities.
Does BEST face the risk of succumbing to its debt-load?
BEST is a relatively highly levered company with a debt-to-equity of 43%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since BEST is currently unprofitable, 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.
Next Steps:
Although BEST’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. However, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for BEST's financial health. Other important fundamentals need to be considered alongside. You should continue to research BEST to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BEST’s future growth? Take a look at our free research report of analyst consensus for BEST’s outlook.
Valuation: What is BEST 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 BEST 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
