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Mid-caps stocks, like WNS (Holdings) Limited ( NYSE:WNS ) with a market capitalization of US$2.6b, 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. WNS’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into WNS here .
How does WNS’s operating cash flow stack up against its debt?
Over the past year, WNS has reduced its debt from US$103m to US$75m , which also accounts for long term debt. With this debt repayment, the current cash and short-term investment levels stands at US$135m for investing into the business. Additionally, WNS has generated US$145m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 192%, indicating that WNS’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In WNS’s case, it is able to generate 1.92x cash from its debt capital.
Does WNS’s liquid assets cover its short-term commitments?
At the current liabilities level of US$157m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.97x. For IT companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can WNS service its debt comfortably?
With a debt-to-equity ratio of 15%, WNS’s debt level may be seen as prudent. This range is considered safe as WNS is not taking on too much debt obligation, which may be constraining for future growth.
WNS’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for WNS’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research WNS (Holdings) to get a better picture of the stock by looking at:
- Future Outlook : What are well-informed industry analysts predicting for WNS’s future growth? Take a look at our free research report of analyst consensus for WNS’s outlook.
- Valuation : What is WNS 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 WNS 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 email@example.com .