Is Compañía de Distribución Integral Logista Holdings, S.A. (BME:LOG) As Strong As Its Balance Sheet Indicates?
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Mid-caps stocks, like Compañía de Distribución Integral Logista Holdings, S.A. (BME:LOG) with a market capitalization of €2.6b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at LOG’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into LOG here.
Check out our latest analysis for Compañía de Distribución Integral Logista Holdings
Does LOG Produce Much Cash Relative To Its Debt?
LOG has built up its total debt levels in the last twelve months, from €34m to €40m made up of predominantly near term debt. With this increase in debt, LOG's cash and short-term investments stands at €142m to keep the business going. Moving on, operating cash flow was negative over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can examine some of LOG’s operating efficiency ratios such as ROA here.
Does LOG’s liquid assets cover its short-term commitments?
At the current liabilities level of €5.9b, it appears that the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.85x. The current ratio is calculated by dividing current assets by current liabilities.
Does LOG face the risk of succumbing to its debt-load?
With debt at 8.3% of equity, LOG may be thought of as having low leverage. LOG is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
LOG’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for LOG's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Compañía de Distribución Integral Logista Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for LOG’s future growth? Take a look at our free research report of analyst consensus for LOG’s outlook.
Valuation: What is LOG 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 LOG is currently mispriced by the market.
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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