Is Compagnie Du Mont-Blanc’s (EPA:MLCMB) Balance Sheet A Threat To Its Future?

While small-cap stocks, such as Compagnie Du Mont-Blanc (EPA:MLCMB) with its market cap of €127m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Understanding the company’s financial health becomes crucial, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. The following basic checks can help you get a picture of the company’s balance sheet strength. However, this is not a comprehensive overview, so I suggest you dig deeper yourself into MLCMB here.

Does MLCMB Produce Much Cash Relative To Its Debt?

MLCMB’s debt levels surged from €118m to €136m over the last 12 months – this includes long-term debt. With this rise in debt, the current cash and short-term investment levels stands at €62m to keep the business going. Additionally, MLCMB has generated cash from operations of €30m in the last twelve months, leading to an operating cash to total debt ratio of 22%, indicating that MLCMB’s current level of operating cash is high enough to cover debt.

Can MLCMB meet its short-term obligations with the cash in hand?

With current liabilities at €58m, it appears that the company has been able to meet these obligations given the level of current assets of €74m, with a current ratio of 1.27x. The current ratio is calculated by dividing current assets by current liabilities. Usually, for Hospitality companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

ENXTPA:MLCMB Historical Debt, April 3rd 2019
ENXTPA:MLCMB Historical Debt, April 3rd 2019

Is MLCMB’s debt level acceptable?

Since total debt levels exceed equity, MLCMB is a highly leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. We can check to see whether MLCMB is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In MLCMB’s, case, the ratio of 14.5x suggests that interest is comfortably 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.

Next Steps:

MLCMB’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. Since there is also no concerns around MLCMB’s liquidity needs, this may be its optimal capital structure for the time being. Keep in mind I haven’t considered other factors such as how MLCMB has been performing in the past. You should continue to research Compagnie Du Mont-Blanc to get a more holistic view of the small-cap by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MLCMB’s future growth? Take a look at our free research report of analyst consensus for MLCMB’s outlook.
  2. Valuation: What is MLCMB 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 MLCMB is currently mispriced by the market.
  3. 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 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.