Does Public Joint Stock Company United Aircraft Corporation's (MCX:UNAC) Debt Level Pose A Problem?

Stocks with market capitalization between $2B and $10B, such as Public Joint Stock Company United Aircraft Corporation (MCX:UNAC) with a size of RUруб287.62b, do not attract as much attention from the investing community as do the small-caps and large-caps. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine UNAC’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of United Aircraft’s financial health, so you should conduct further analysis into UNAC here. Check out our latest analysis for United Aircraft

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

UNAC has built up its total debt levels in the last twelve months, from RUруб308.96b to RUруб0 , which comprises of short- and long-term debt. With this rise in debt, UNAC's cash and short-term investments stands at RUруб175.61b for investing 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 take a look at some of UNAC’s operating efficiency ratios such as ROA here.

Can UNAC pay its short-term liabilities?

At the current liabilities level of RUруб512.50b liabilities, it seems that the business has been able to meet these obligations given the level of current assets of RUруб691.70b, with a current ratio of 1.35x. For Aerospace & Defense companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Can UNAC service its debt comfortably?

With total debt exceeding equities, UNAC is considered a highly levered company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since UNAC is presently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Next Steps:

UNAC’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 exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven't considered other factors such as how UNAC has been performing in the past. You should continue to research United Aircraft to get a better picture of the stock by looking at:

1. Historical Performance: What has UNAC'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.
2. 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.

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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.