Yahoo Finance What You Must Know About Jaypee Infratech Limited’s (NSE:JPINFRATEC) Financial Strength
While small-cap stocks, such as Jaypee Infratech Limited (NSE:JPINFRATEC) with its market cap of ₹8.21b, 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 JPINFRATEC is loss-making right now, it’s vital to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into JPINFRATEC here.
How much cash does JPINFRATEC generate through its operations?
JPINFRATEC has shrunken its total debt levels in the last twelve months, from ₹90.13b to ₹75.66b , which is made up of current and long term debt. With this reduction in debt, JPINFRATEC currently has ₹571.10m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of JPINFRATEC’s operating efficiency ratios such as ROA here.
Can JPINFRATEC pay its short-term liabilities?
Looking at JPINFRATEC’s most recent ₹82.92b liabilities, the company has not been able to meet these commitments with a current assets level of ₹79.19b, leading to a 0.96x current account ratio. which is under the appropriate industry ratio of 3x.
Does JPINFRATEC face the risk of succumbing to its debt-load?
JPINFRATEC is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since JPINFRATEC is currently loss-making, sustainability of its current state of operations becomes a concern. 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:
JPINFRATEC’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I’m sure JPINFRATEC has company-specific issues impacting its capital structure decisions. You should continue to research Jaypee Infratech to get a better picture of the stock by looking at:
Valuation: What is JPINFRATEC 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 JPINFRATEC is currently mispriced by the market.
Historical Performance: What has JPINFRATEC’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.
