Is Quartiers Properties AB (publ) (STO:QUART) A Financially Sound Company?
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Quartiers Properties AB (publ) (STO:QUART) is a small-cap stock with a market capitalization of kr271m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Assessing first and foremost the financial health is crucial, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. The following basic checks can help you get a picture of the company's balance sheet strength. Nevertheless, potential investors would need to take a closer look, and I recommend you dig deeper yourself into QUART here.
Does QUART Produce Much Cash Relative To Its Debt?
Over the past year, QUART has ramped up its debt from kr164m to kr202m , which accounts for long term debt. With this increase in debt, the current cash and short-term investment levels stands at kr8.4m , ready to be used for running the business. We note it produced negative cash flow over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can assess some of QUART’s operating efficiency ratios such as ROA here.
Does QUART’s liquid assets cover its short-term commitments?
With current liabilities at kr63m, it seems that the business has been able to meet these commitments with a current assets level of kr188m, leading to a 2.97x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. For Real Estate companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too much capital in low return investments.
Can QUART service its debt comfortably?
With a debt-to-equity ratio of 54%, QUART can be considered as an above-average leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies.
Next Steps:
QUART’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. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Keep in mind I haven't considered other factors such as how QUART has been performing in the past. I recommend you continue to research Quartiers Properties to get a more holistic view of the small-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for QUART’s future growth? Take a look at our free research report of analyst consensus for QUART’s outlook.
Historical Performance: What has QUART'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.
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.
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.
