Is N. Leventeris S.A.'s (ATH:LEBEK) Balance Sheet Strong Enough To Weather A Storm?

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N. Leventeris S.A. (ATH:LEBEK) is a small-cap stock with a market capitalization of €1.5m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that LEBEK is not presently profitable, it’s crucial to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. However, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into LEBEK here.

How does LEBEK’s operating cash flow stack up against its debt?

LEBEK has built up its total debt levels in the last twelve months, from €2.3m to €2.5m – this includes long-term debt. With this rise in debt, LEBEK currently has €17k remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn't be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of LEBEK’s operating efficiency ratios such as ROA here.

Does LEBEK’s liquid assets cover its short-term commitments?

Looking at LEBEK’s €1.7m in current liabilities, it appears that the company has been able to meet these commitments with a current assets level of €1.8m, leading to a 1.01x current account ratio. Usually, for Metals and Mining companies, this is a suitable ratio since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Does LEBEK face the risk of succumbing to its debt-load?

With debt at 39% of equity, LEBEK may be thought of as appropriately levered. This range is considered safe as LEBEK is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is very low for LEBEK, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

LEBEK’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for LEBEK's financial health. Other important fundamentals need to be considered alongside. You should continue to research N. Leventeris to get a more holistic view of the stock by looking at:

1. Valuation: What is LEBEK 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 LEBEK is currently mispriced by the market.
2. Historical Performance: What has LEBEK's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.

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 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.