While small-cap stocks, such as Bénéteau S.A. (EPA:BEN) with its market cap of €845m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. We’ll look at some basic checks that can form a snapshot the company’s financial strength. Nevertheless, these checks don’t give you a full picture, so I’d encourage you to dig deeper yourself into BEN here.
Does BEN Produce Much Cash Relative To Its Debt?
BEN has sustained its debt level by about €103m over the last 12 months which accounts for long term debt. At this stable level of debt, BEN’s cash and short-term investments stands at €265m , ready to be used for running the business. On top of this, BEN has produced €155m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 150%, meaning that BEN’s operating cash is sufficient to cover its debt.
Can BEN meet its short-term obligations with the cash in hand?
At the current liabilities level of €413m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.51x. The current ratio is calculated by dividing current assets by current liabilities. Generally, for Leisure companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is BEN’s debt level acceptable?
With a debt-to-equity ratio of 16%, BEN’s debt level may be seen as prudent. This range is considered safe as BEN is not taking on too much debt obligation, which may be constraining for future growth. We can test if BEN’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For BEN, the ratio of 42.37x suggests that interest is comfortably covered, which means that lenders may be willing to lend out more funding as BEN’s high interest coverage is seen as responsible and safe practice.
BEN’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 an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for BEN’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Bénéteau to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BEN’s future growth? Take a look at our free research report of analyst consensus for BEN’s outlook.
- Valuation: What is BEN 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 BEN 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.