How Financially Strong Is Beter Bed Holding N.V. (AMS:BBED)?
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Investors are always looking for growth in small-cap stocks like Beter Bed Holding N.V. (AMS:BBED), with a market cap of €78m. However, an important fact which most ignore is: how financially healthy is the business? Given that BBED is not presently profitable, it’s vital to assess the current state of its operations and pathway to profitability. Let's work through some financial health checks you may wish to consider if you're interested in this stock. Nevertheless, potential investors would need to take a closer look, and I recommend you dig deeper yourself into BBED here.
BBED’s Debt (And Cash Flows)
Over the past year, BBED has ramped up its debt from €17m to €23m . With this increase in debt, BBED's cash and short-term investments stands at €6.2m to keep the business going. Though, BBED is only generating €18k in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of below 1x, meaning that its operating cash is less than its debt.
Can BBED pay its short-term liabilities?
At the current liabilities level of €90m, it appears that the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.83x. The current ratio is calculated by dividing current assets by current liabilities.
Can BBED service its debt comfortably?
BBED is a relatively highly levered company with a debt-to-equity of 49%. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. Though, since BBED is presently unprofitable, there’s a question of sustainability of its current operations. 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:
Although BBED’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. Though its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I'm sure BBED has company-specific issues impacting its capital structure decisions. You should continue to research Beter Bed Holding to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BBED’s future growth? Take a look at our free research report of analyst consensus for BBED’s outlook.
Historical Performance: What has BBED'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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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
