Yahoo Finance Is Myer Holdings Limited’s (ASX:MYR) Balance Sheet Strong Enough To Weather A Storm?
Myer Holdings Limited (ASX:MYR) is a small-cap stock with a market capitalization of AU$324.40m. 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 Multiline Retail industry facing headwinds from current disruption, in particular ones that run negative earnings, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. I believe these basic checks tell most of the story you need to know. Though, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into MYR here.
How much cash does MYR generate through its operations?
MYR has sustained its debt level by about AU$143.89m over the last 12 months comprising of short- and long-term debt. At this constant level of debt, MYR’s cash and short-term investments stands at AU$30.59m , ready to deploy into the business. Additionally, MYR has generated cash from operations of AU$149.28m in the last twelve months, leading to an operating cash to total debt ratio of 103.74%, indicating that MYR’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for loss making businesses since metrics such as return on asset (ROA) requires positive earnings. In MYR’s case, it is able to generate 1.04x cash from its debt capital.
Does MYR’s liquid assets cover its short-term commitments?
With current liabilities at AU$487.01m, it appears that the company has not been able to meet these commitments with a current assets level of AU$430.57m, leading to a 0.88x current account ratio. which is under the appropriate industry ratio of 3x.
Does MYR face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 17.03%, MYR’s debt level may be seen as prudent. This range is considered safe as MYR is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for MYR, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
MYR’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 MYR, especially if meeting short-term obligations could also bring about issues. I admit this is a fairly basic analysis for MYR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Myer Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MYR’s future growth? Take a look at our free research report of analyst consensus for MYR’s outlook.
Valuation: What is MYR 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 MYR 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.
