Elviemek Land Development – Logistics Parks – Energy – Recycling S.A. (ATH:ELBIO) is a small-cap stock with a market capitalization of €33m. 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 ELBIO is not presently profitable, it’s vital to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into ELBIO here.
How much cash does ELBIO generate through its operations?
ELBIO has shrunken its total debt levels in the last twelve months, from €6.5m to €5.3m made up of predominantly near term debt. With this reduction in debt, the current cash and short-term investment levels stands at €753k , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of ELBIO’s operating efficiency ratios such as ROA here.
Can ELBIO pay its short-term liabilities?
Looking at ELBIO’s €8.6m in current liabilities, the company may not have an easy time meeting these commitments with a current assets level of €3.9m, leading to a current ratio of 0.45x.
Does ELBIO face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 27%, ELBIO’s debt level may be seen as prudent. ELBIO is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with ELBIO, and the company has plenty of headroom and ability to raise debt should it need to in the future.
ELBIO’s debt level is appropriate for a company its size. Furthermore, it is able to generate sufficient cash flow coverage, meaning it is able to put its debt in good use. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. This is only a rough assessment of financial health, and I’m sure ELBIO has company-specific issues impacting its capital structure decisions. You should continue to research Elviemek Land Development – Logistics Parks – Energy – Recycling to get a better picture of the stock by looking at:
- Historical Performance: What has ELBIO’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.
- 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.