What does Bremer Lagerhaus Gesellschaft Aktiengesellschaft von 1877’s (FRA:BLH) Balance Sheet Tell Us About Its Future?
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Investors are always looking for growth in small-cap stocks like Bremer Lagerhaus Gesellschaft Aktiengesellschaft von 1877 (FRA:BLH), with a market cap of €51m. However, an important fact which most ignore is: how financially healthy is the business? Assessing first and foremost the financial health is vital, 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. Though, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into BLH here.
How much cash does BLH generate through its operations?
BLH’s debt levels have fallen from €225m to €200m over the last 12 months – this includes long-term debt. With this debt payback, BLH currently has €14m remaining in cash and short-term investments , ready to deploy into the business. Additionally, BLH has produced €42m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 21%, meaning that BLH’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 BLH’s case, it is able to generate 0.21x cash from its debt capital.
Can BLH pay its short-term liabilities?
Looking at BLH’s €285m in current liabilities, the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.95x.
Is BLH’s debt level acceptable?
BLH is a relatively highly levered company with a debt-to-equity of 85%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
BLH’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 low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. This is only a rough assessment of financial health, and I’m sure BLH has company-specific issues impacting its capital structure decisions. You should continue to research Bremer Lagerhaus Gesellschaft von 1877 to get a more holistic view of the stock by looking at:
Historical Performance: What has BLH’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.
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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