Investors are always looking for growth in small-cap stocks like Bremer Lagerhaus Gesellschaft Aktiengesellschaft von 1877 (FRA:BLH), with a market cap of €45m. However, an important fact which most ignore is: how financially healthy is the business? Evaluating financial health as part of your investment thesis is crucial, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Though, given that I have not delve into the company-specifics, I recommend you 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 , which is made up of current and long term debt. With this debt payback, the current cash and short-term investment levels stands at €14m for investing into the business. On top of this, 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 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 BLH’s case, it is able to generate 0.21x cash from its debt capital.
Can BLH pay its short-term liabilities?
At the current liabilities level of €285m 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 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 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. You should continue to research Bremer Lagerhaus Gesellschaft von 1877 to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BLH’s future growth? Take a look at our free research report of analyst consensus for BLH’s outlook.
- 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.