Yahoo Finance What You Must Know About accesso Technology Group plc’s (LON:ACSO) Financial Strength
While small-cap stocks, such as accesso Technology Group plc (LON:ACSO) with its market cap of UK£710.09m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Electronic companies, even ones that are profitable, are inclined towards being higher risk. Assessing first and foremost the financial health is crucial. Here are few basic financial health checks you should consider before taking the plunge. However, I know these factors are very high-level, so I suggest you dig deeper yourself into ACSO here.
How does ACSO’s operating cash flow stack up against its debt?
Over the past year, ACSO has ramped up its debt from UK£9.36m to UK£16.15m , which comprises of short- and long-term debt. With this increase in debt, ACSO’s cash and short-term investments stands at UK£28.67m for investing into the business. On top of this, ACSO has generated cash from operations of UK£32.87m during the same period of time, leading to an operating cash to total debt ratio of 203.56%, meaning that ACSO’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In ACSO’s case, it is able to generate 2.04x cash from its debt capital.
Does ACSO’s liquid assets cover its short-term commitments?
Looking at ACSO’s most recent UK£50.50m liabilities, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.97x, which is below the prudent industry ratio of 3x.
Does ACSO face the risk of succumbing to its debt-load?
With debt at 9.21% of equity, ACSO may be thought of as having low leverage. ACSO is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can test if ACSO’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For ACSO, the ratio of 10.09x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving ACSO ample headroom to grow its debt facilities.
Next Steps:
ACSO’s high cash coverage and conservative debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. But, as shareholders, you should try and determine whether this level of debt is justified for ACSO, especially if meeting short-term obligations could also bring about issues. I admit this is a fairly basic analysis for ACSO’s financial health. Other important fundamentals need to be considered alongside. You should continue to research accesso Technology Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ACSO’s future growth? Take a look at our free research report of analyst consensus for ACSO’s outlook.
Valuation: What is ACSO 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 ACSO 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.
