Yahoo Finance Aeroporto Guglielmo Marconi di Bologna Sp.A. (BIT:ADB): Time For A Financial Health Check
Aeroporto Guglielmo Marconi di Bologna Sp.A. (BIT:ADB) is a small-cap stock with a market capitalization of €544.05M. 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? Evaluating financial health as part of your investment thesis is vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into ADB here.
How does ADB’s operating cash flow stack up against its debt?
ADB has shrunken its total debt levels in the last twelve months, from €33.74M to €26.78M , which is made up of current and long term debt. With this reduction in debt, ADB currently has €20.78M remaining in cash and short-term investments for investing into the business. Moreover, ADB has produced cash from operations of €25.28M in the last twelve months, resulting in an operating cash to total debt ratio of 94.39%, indicating that ADB’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In ADB’s case, it is able to generate 0.94x cash from its debt capital.
Does ADB’s liquid assets cover its short-term commitments?
Looking at ADB’s most recent €51.55M liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.06x. Generally, for Infrastructure companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is ADB’s debt level acceptable?
With debt at 15.36% of equity, ADB may be thought of as appropriately levered. ADB is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether ADB 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 ADB’s, case, the ratio of 26.66x suggests that interest is comfortably 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:
ADB has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how ADB has been performing in the past. I suggest you continue to research Aeroporto Guglielmo Marconi di Bologna to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ADB’s future growth? Take a look at our free research report of analyst consensus for ADB’s outlook.
Valuation: What is ADB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ADB is currently mispriced by the market.
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.
