Mid-caps stocks, like Indra Sistemas SA. (BME:IDR) with a market capitalization of €1.97B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. IDR’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into IDR here. Check out our latest analysis for Indra Sistemas
Does IDR generate enough cash through operations?
IDR has built up its total debt levels in the last twelve months, from €1.20B to €1.29B , which is made up of current and long term debt. With this rise in debt, IDR’s cash and short-term investments stands at €700.95M , ready to deploy into the business. Additionally, IDR has produced cash from operations of €247.49M over the same time period, resulting in an operating cash to total debt ratio of 19.22%, indicating that IDR’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In IDR’s case, it is able to generate 0.19x cash from its debt capital.
Can IDR meet its short-term obligations with the cash in hand?
With current liabilities at €1.97B, it appears that the company has been able to meet these obligations given the level of current assets of €2.21B, with a current ratio of 1.12x. Generally, for IT companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can IDR service its debt comfortably?
Since total debt levels have outpaced equities, IDR is a highly leveraged company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In IDR’s case, the ratio of 6.52x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
At its current level of cash flow coverage, IDR has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure IDR has company-specific issues impacting its capital structure decisions. I recommend you continue to research Indra Sistemas to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IDR’s future growth? Take a look at our free research report of analyst consensus for IDR’s outlook.
- Valuation: What is IDR 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 IDR 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.