Is MSTC (NSE:MSTCLTD) A Risky Investment?

Some say that volatility is the best way to think about risk as an investor, rather than liability, but Warren Buffett famously said, “Volatility is not synonymous with risk.” So, given how risky certain stocks are, it’s clear that debt needs to be considered, as too much debt can sink a careful MSTC Limited (NSE:MSTCLTD) has a liability on its balance sheet. But should shareholders worry about the use of debt?

when debt is dangerous

Debt helps a business until it struggles to pay it back with either new capital or free cash flow. Although less common, we often see debt companies permanently diluting their shareholders. Of course, debt can be an important tool in business, especially in capital-heavy ones. When looking at debt levels, first consider both cash and debt levels together.

See MSTC’s latest analysis

How much debt does MSTC have?

As shown below, MSTC has a debt of £1.45 billion as of September 2022, down from £153 million a year earlier. However, as we have cash of Rs 10.8 billion on our balance sheet, we actually have net cash of Rs 9.38 billion.

NSEI:MSTCLTD Debt to Equity History Dec 26, 2022

Look at MSTC’s debt

According to its last reported balance sheet, MSTC had a debt of Rs.13.5 billion due within 12 months and a debt of Rs.846.6 million due over 12 months. Offsetting these debts was cash of Rs.10.8 billion and receivables of Rs.4.76 billion due within 12 months. So it’s actually 1.29 billion yen. more Current assets over total liabilities.

This surplus suggests that MSTC’s balance sheet is conservative and will probably be able to pay off its debt without much difficulty. Simply put, MSTC boasts net cash, so it’s safe to say it doesn’t have a lot of debt.

Additionally, MSTC has grown EBIT by 46% in the last 12 months. This growth makes it easier to handle debt. Clearly, the balance sheet is the starting point when analyzing debt levels. However, it is MSTC’s earnings that will affect how the balance sheet will hold up in the future. So if you want to learn more about earnings, it might be worth checking out this graph of long-term earnings trends.

But a final consideration is also important. Because a company cannot pay its debts with paper profits. I need cash. MSTC may have net cash on its balance sheet, but it’s still interesting to see how the business converts earnings before interest (EBIT) into free cash flow. Manage your debt. Fortunately for shareholders, MSTC actually generated more free cash flow than he did EBIT over the past three years. When the beat drops at a Daft Punk concert, this kind of strong cash conversion excites us as much as the audience.


It is always prudent to look at corporate debt, but in this case MSTC has a net cash of Rs 9.38 crore and a decent balance sheet. And impressed with his £2.2bn free cash flow which is 208% of EBIT. So is MSTC’s debt a risk? We don’t think so. Arguably, we learn the most about debt from the balance sheet. Ultimately, however, all companies may have the risk of existing off balance sheets. Identified two warning signs Understanding them should be part of the investment process.

After all, sometimes it’s easier to focus on companies that don’t require debt.Readers have access to a list of growth stocks with zero net debt 100% freejust now.

Valuation is complicated, but we’re here to help make it simple.

find out if MSTC You may be overestimated or underestimated by checking out our comprehensive analysis including: Fair value estimates, risks and warnings, dividends, insider trading and financial health.

View Free Analysis

This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price sensitive company announcements or qualitative materials. Is not …

Source link

Leave a Reply

%d bloggers like this: