Mid-caps stocks, like Public Joint Stock Company Long-Distance and International Telecommunications Rostelecom (MISX:RTKM) with a market capitalization of RUРУБ147.25B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at RTKM’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions 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 RTKM here.See our latest analysis for Long-Distance and International Telecommunications Rostelecom
How does RTKM’s operating cash flow stack up against its debt?
Over the past year, RTKM has maintained its debt levels at around RUРУБ191.37B made up of current and long term debt. At this stable level of debt, the current cash and short-term investment levels stands at RUРУБ8.56B for investing into the business. Moreover, RTKM has produced RUРУБ71.77B in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 37.50%, indicating that RTKM’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In RTKM’s case, it is able to generate 0.38x cash from its debt capital.
Can RTKM pay its short-term liabilities?
At the current liabilities level of RUРУБ95.18B liabilities, it seems that the business has not been able to meet these commitments with a current assets level of RUРУБ70.99B, leading to a 0.75x current account ratio. which is under the appropriate industry ratio of 3x.
Is RTKM’s debt level acceptable?
RTKM is a relatively highly levered company with a debt-to-equity of 76.74%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In RTKM’s case, the ratio of 2.1x suggests that interest is not strongly covered, which means that lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.
RTKM’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. 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 RTKM’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Long-Distance and International Telecommunications Rostelecom to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RTKM’s future growth? Take a look at our free research report of analyst consensus for RTKM’s outlook.
- Valuation: What is RTKM 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 RTKM 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.