What You Must Know About Public Joint Stock Company Pavlovo Bus's (MCX:PAZA) Financial Strength

While small-cap stocks, such as Public Joint Stock Company Pavlovo Bus (MISX:PAZA) with its market cap of RUРУБ707.12M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Evaluating financial health as part of your investment thesis is vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into PAZA here.

Does PAZA generate an acceptable amount of cash through operations?

PAZA has shrunken its total debt levels in the last twelve months, from RUРУБ9.92B to RUРУБ7.97B , which is made up of current and long term debt. With this debt payback, the current cash and short-term investment levels stands at RUРУБ49.68M , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. 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 PAZA’s operating efficiency ratios such as ROA here.

Can PAZA meet its short-term obligations with the cash in hand?

At the current liabilities level of RUРУБ3.40B liabilities, the company has been able to meet these obligations given the level of current assets of RUРУБ5.75B, with a current ratio of 1.69x. Generally, for Machinery companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

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

PAZA is a highly-leveraged company with debt exceeding equity by over 100%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In PAZA's case, the ratio of 0.16x suggests that interest is not strongly covered, which means that lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.

Next Steps:

At its current level of cash flow coverage, PAZA has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for PAZA's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Pavlovo Bus to get a better picture of the stock by looking at the areas below. Just a heads up - to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.

• 1. Valuation: What is PAZA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in this free research report helps visualize whether PAZA is currently mispriced by the market.
• 2. Historical Performance: What has PAZA'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 PAZA's historicals for more clarity.
• 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.

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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.