Is Alba Mineral Resources PLC’s (LON:ALBA) Balance Sheet Strong Enough To Weather A Storm?
While small-cap stocks, such as Alba Mineral Resources PLC (AIM:ALBA) with its market cap of UK£8.63M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since ALBA is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I recommend you dig deeper yourself into ALBA here.
Does ALBA generate enough cash through operations?
ALBA’s debt level has been constant at around UK£253.07K over the previous year . At this stable level of debt, ALBA currently has UK£668.34K remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can assess some of ALBA’s operating efficiency ratios such as ROA here.
Can ALBA meet its short-term obligations with the cash in hand?
Looking at ALBA’s most recent UK£630.29K liabilities, it seems that the business has been able to meet these obligations given the level of current assets of UK£683.60K, with a current ratio of 1.08x. Generally, for Metals and Mining companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can ALBA service its debt comfortably?
ALBA’s level of debt is low relative to its total equity, at 6.71%. This range is considered safe as ALBA is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is virtually non-existent with ALBA, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
ALBA’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for ALBA’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Alba Mineral Resources to get a better picture of the stock by looking at:
1. Valuation: What is ALBA 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 ALBA is currently mispriced by the market.
2. Historical Performance: What has ALBA’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.
3. 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.
