What Does Cracker Barrel Old Country Store, Inc.’s (NASDAQ:CBRL) Balance Sheet Tell Us About It?

While small-cap stocks, such as Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) with its market cap of US$3.7b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. We’ll look at some basic checks that can form a snapshot the company’s financial strength. However, these checks don’t give you a full picture, so I’d encourage you to dig deeper yourself into CBRL here.

Does CBRL Produce Much Cash Relative To Its Debt?

Over the past year, CBRL has maintained its debt levels at around US$401m – this includes long-term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$170m to keep the business going. Moreover, CBRL has produced US$373m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 93%, meaning that CBRL’s operating cash is sufficient to cover its debt.

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

Looking at CBRL’s US$380m in current liabilities, it seems that the business may not be able to easily meet these obligations given the level of current assets of US$359m, with a current ratio of 0.94x. The current ratio is the number you get when you divide current assets by current liabilities.

NasdaqGS:CBRL Historical Debt, April 18th 2019
NasdaqGS:CBRL Historical Debt, April 18th 2019

Can CBRL service its debt comfortably?

CBRL is a relatively highly levered company with a debt-to-equity of 64%. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. We can check to see whether CBRL is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In CBRL’s, case, the ratio of 17.35x suggests that interest is comfortably covered, which means that lenders may be willing to lend out more funding as CBRL’s high interest coverage is seen as responsible and safe practice.

Next Steps:

CBRL’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Though its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for CBRL’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Cracker Barrel Old Country Store to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CBRL’s future growth? Take a look at our free research report of analyst consensus for CBRL’s outlook.
  2. Valuation: What is CBRL 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 CBRL is currently mispriced by the market.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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