Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Almirall SA. (BME:ALM) with a market-capitalization of €1.63B, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Today we will look at ALM’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 ALM here. Check out our latest analysis for Almirall
How does ALM’s operating cash flow stack up against its debt?
Over the past year, ALM has reduced its debt from €342.47M to €264.58M , which comprises of short- and long-term debt. With this debt repayment, ALM currently has €280.10M remaining in cash and short-term investments for investing into the business. Additionally, ALM has generated cash from operations of €6.09M over the same time period, leading to an operating cash to total debt ratio of 2.30%, meaning that ALM’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In ALM’s case, it is able to generate 0.023x cash from its debt capital.
Does ALM’s liquid assets cover its short-term commitments?
At the current liabilities level of €348.41M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of €515.36M, with a current ratio of 1.48x. Usually, for Pharmaceuticals companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does ALM face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 23.34%, ALM’s debt level may be seen as prudent. ALM is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for ALM, and the company also has the ability and headroom to increase debt if needed going forward.
Although ALM’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for ALM’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Almirall to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ALM’s future growth? Take a look at our free research report of analyst consensus for ALM’s outlook.
- Valuation: What is ALM 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 ALM 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.