What You Must Know About Plaisio Computers SA.’s (ATH:PLAIS) Financial Strength
While small-cap stocks, such as Plaisio Computers SA. (ATSE:PLAIS) with its market cap of €97.13M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Specialty Retail businesses operating in the environment facing headwinds from current disruption, even ones that are profitable, tend to be high risk. Evaluating financial health as part of your investment thesis is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into PLAIS here.
How does PLAIS’s operating cash flow stack up against its debt?
PLAIS has built up its total debt levels in the last twelve months, from €10.65M to €15.46M , which comprises of short- and long-term debt. With this growth in debt, PLAIS’s cash and short-term investments stands at €42.79M for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of PLAIS’s operating efficiency ratios such as ROA here.
Can PLAIS pay its short-term liabilities?
Looking at PLAIS’s most recent €54.92M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.09x. For Specialty Retail companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can PLAIS service its debt comfortably?
With a debt-to-equity ratio of 20.00%, PLAIS’s debt level may be seen as prudent. PLAIS is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether PLAIS is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In PLAIS’s, case, the ratio of 4.76x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Next Steps:
Although PLAIS’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how PLAIS has been performing in the past. You should continue to research Plaisio Computers to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for PLAIS’s future growth? Take a look at our free research report of analyst consensus for PLAIS’s outlook.
2. Historical Performance: What has PLAIS’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.
3. 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.
