Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Bollore (EPA:BOL). With a market valuation of €10.5b, BOL is a safe haven in times of market uncertainty due to its strong balance sheet. In times of low liquidity in the market, these firms won’t be left high and dry. They are also relatively unaffected by increases in interest rates. Today I will analyse the latest financial data for BOL to determine is solvency and liquidity and whether the stock is a sound investment.
How does BOL’s operating cash flow stack up against its debt?
BOL has sustained its debt level by about €9.6b over the last 12 months – this includes both the current and long-term debt. At this current level of debt, the current cash and short-term investment levels stands at €4.8b for investing into the business. Additionally, BOL has generated cash from operations of €2.0b during the same period of time, resulting in an operating cash to total debt ratio of 21%, signalling that BOL’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In BOL’s case, it is able to generate 0.21x cash from its debt capital.
Can BOL pay its short-term liabilities?
Looking at BOL’s most recent €12.8b liabilities, the company has been able to meet these obligations given the level of current assets of €13.8b, with a current ratio of 1.08x. For Logistics companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is BOL’s debt level acceptable?
BOL’s level of debt is appropriate relative to its total equity, at 34%. This range is considered safe as BOL is not taking on too much debt obligation, which may be constraining for future growth. We can check to see whether BOL is able to meet its debt obligations by looking at the net interest coverage ratio. Preferably, earnings before interest and tax (EBIT) should be at least three times as large as net interest. In BOL’s case, the ratio of 11.33x suggests that interest is comfortably covered. High interest coverage serves as an indication of the safety of a company, which highlights why many large organisations like BOL are considered a risk-averse investment.
Although BOL’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 an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how BOL has been performing in the past. You should continue to research Bollore to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BOL’s future growth? Take a look at our free research report of analyst consensus for BOL’s outlook.
- Valuation: What is BOL 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 BOL 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.
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.