What does AFT Corporation Limited’s (ASX:AFT) Balance Sheet Tell Us About Its Future?

Investors are always looking for growth in small-cap stocks like AFT Corporation Limited (ASX:AFT), with a market cap of AU$9.02M. However, an important fact which most ignore is: how financially healthy is the business? Since AFT is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into AFT here.

Does AFT generate an acceptable amount of cash through operations?

AFT has increased its debt level by about AU$81.99K over the last 12 months . With this growth in debt, the current cash and short-term investment levels stands at AU$45.68K , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of AFT’s operating efficiency ratios such as ROA here.

Can AFT meet its short-term obligations with the cash in hand?

Looking at AFT’s most recent AU$218.13K liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.03x. Generally, for Building companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.

ASX:AFT Historical Debt Apr 25th 18
ASX:AFT Historical Debt Apr 25th 18

Does AFT face the risk of succumbing to its debt-load?

With debt reaching 97.32% of equity, AFT may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since AFT is currently unprofitable, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

AFT’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for AFT’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research AFT to get a more holistic view of the stock by looking at:

  1. Historical Performance: What has AFT’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.

  2. 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.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.