Yahoo Finance Are Iliad SA’s (EPA:ILD) Interest Costs Too High?
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Iliad SA (EPA:ILD) with a market-capitalization of €8.32b, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Today we will look at ILD’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into ILD here. See our latest analysis for Iliad
How much cash does ILD generate through its operations?
ILD’s debt levels surged from €1.88b to €2.67b over the last 12 months , which is made up of current and long term debt. With this increase in debt, ILD currently has €216.09m remaining in cash and short-term investments for investing into the business. Moreover, ILD has produced €1.35b in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 50.62%, signalling that ILD’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In ILD’s case, it is able to generate 0.51x cash from its debt capital.
Does ILD’s liquid assets cover its short-term commitments?
At the current liabilities level of €2.16b liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.46x, which is below the prudent industry ratio of 3x.
Is ILD’s debt level acceptable?
With a debt-to-equity ratio of 78.99%, ILD can be considered as an above-average leveraged company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether ILD 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 ILD’s, case, the ratio of 30.37x 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:
Although ILD’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. However, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for ILD’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Iliad to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ILD’s future growth? Take a look at our free research report of analyst consensus for ILD’s outlook.
Valuation: What is ILD 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 ILD 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.
