Should You Care About OnTheMarket plc’s (LON:OTMP) Cash Levels?

OnTheMarket plc (AIM:OTMP) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. This difference directly flows down to how much the stock is worth. Operating in the internet software and services industry, OnTheMarket is currently valued at UK£69.92M. I’ve analysed below, the health and outlook of OnTheMarket’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio. View our latest analysis for OnTheMarket

Is OnTheMarket generating enough cash?

Free cash flow (FCF) is the amount of cash OnTheMarket has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations. I will be analysing OnTheMarket’s FCF by looking at its FCF yield and its operating cash flow growth. The yield will tell us whether the stock is generating enough cash to compensate for the risk investors take on by holding a single stock, which I will compare to the market index. The growth will proxy for sustainability levels of this cash generation.

After accounting for capital expenses required to run the business, OnTheMarket is not able to generate positive FCF, leading to a negative FCF yield – not very useful for interpretation!

Is OnTheMarket's yield sustainable?

OnTheMarket’s FCF may be negative today, but is operating cash flows expected to improve in the future? Let’s examine the cash flow trend the company is anticipated to produce over time. Over the next three years, a doubling in growth of operating cash flows is extremely uplifting, especially if capital expenditure grows at a lower rate. Below is a table of OnTheMarket’s operating cash flow in the past year, as well as the anticipated level going forward.

	Current	+1 year	+2 year	+3 year
Operating Cash Flow (OCF)	UK£2.00M	-UK£8.90M	-UK£14.61M	UK£9.86M
OCF Growth Year-On-Year		-545.97%	64.18%	-167.48%
OCF Growth From Current Year			-832.19%	394.09%

Next Steps:

Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. I suggest you continue to research OnTheMarket to get a better picture of the company by looking at:

1. Valuation: What is OTMP 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 OTMP is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on OnTheMarket’s board and the CEO’s back ground.
3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.