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While small-cap stocks, such as Bremer Lagerhaus Gesellschaft Aktiengesellschaft von 1877 (FRA:BLH) with its market cap of €47m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. So, understanding the company’s financial health becomes vital, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into BLH here.
How much cash does BLH generate through its operations?
BLH has shrunken its total debt levels in the last twelve months, from €225m to €200m – this includes long-term debt. With this debt repayment, the current cash and short-term investment levels stands at €14m , ready to deploy into the business. Additionally, BLH has generated €42m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 21%, signalling that BLH’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 BLH’s case, it is able to generate 0.21x cash from its debt capital.
Can BLH pay its short-term liabilities?
Looking at BLH’s €285m in current liabilities, it seems that the business arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.95x.
Is BLH’s debt level acceptable?
With a debt-to-equity ratio of 85%, BLH can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
BLH’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. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for BLH’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Bremer Lagerhaus Gesellschaft von 1877 to get a better picture of the stock by looking at:
- Historical Performance: What has BLH’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 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.