While small-cap stocks, such as Impexmetal SA. (WSE:IPX) with its market cap of ZŁ835.74M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. So, understanding the company’s financial health becomes essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. However, I know these factors are very high-level, so I recommend you dig deeper yourself into IPX here.
How does IPX’s operating cash flow stack up against its debt?
IPX has built up its total debt levels in the last twelve months, from ZŁ407.58M to ZŁ487.08M , which comprises of short- and long-term debt. With this rise in debt, IPX’s cash and short-term investments stands at ZŁ102.18M for investing into the business. On top of this, IPX has generated cash from operations of ZŁ111.93M over the same time period, leading to an operating cash to total debt ratio of 22.98%, indicating that IPX’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In IPX’s case, it is able to generate 0.23x cash from its debt capital.
Does IPX’s liquid assets cover its short-term commitments?
With current liabilities at ZŁ745.68M, it seems that the business has been able to meet these commitments with a current assets level of ZŁ1.03B, leading to a 1.38x current account ratio. Generally, for Metals and Mining companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is IPX’s debt level acceptable?With a debt-to-equity ratio of 28.15%, IPX’s debt level may be seen as prudent. IPX is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
IPX’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, 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 IPX’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Impexmetal to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for IPX’s future growth? Take a look at our free research report of analyst consensus for IPX’s outlook.
- 2. Historical Performance: What has IPX’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.