Is Toupargel Groupe SA’s (EPA:TOU) Balance Sheet Strong Enough To Weather A Storm?
Toupargel Groupe SA (ENXTPA:TOU) is a small-cap stock with a market capitalization of €42.54M. 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? Companies operating in the Online Retail industry facing headwinds from current disruption, especially ones that are currently loss-making, tend to be high risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into TOU here.
How does TOU’s operating cash flow stack up against its debt?
TOU has built up its total debt levels in the last twelve months, from €21.75M to €34.43M , which is made up of current and long term debt. With this rise in debt, the current cash and short-term investment levels stands at €2.98M , 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 examine some of TOU’s operating efficiency ratios such as ROA here.
Does TOU’s liquid assets cover its short-term commitments?
At the current liabilities level of €70.82M liabilities, it seems that the business has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.32x, which is below the prudent industry ratio of 3x.
Can TOU service its debt comfortably?
With a debt-to-equity ratio of 63.03%, TOU can be considered as an above-average leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since TOU is currently unprofitable, sustainability of its current state of operations becomes a concern. 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:
TOU’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for TOU’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Toupargel Groupe to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TOU’s future growth? Take a look at our free research report of analyst consensus for TOU’s outlook.
Historical Performance: What has TOU’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.
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.
