U.S. Markets closed
  • S&P 500

    4,128.80
    +31.63 (+0.77%)
     
  • Dow 30

    33,800.60
    +297.00 (+0.89%)
     
  • Nasdaq

    13,900.19
    +211.39 (+1.54%)
     
  • Russell 2000

    2,243.47
    +20.42 (+0.92%)
     
  • Crude Oil

    59.34
    +0.02 (+0.03%)
     
  • Gold

    1,744.10
    -0.70 (-0.04%)
     
  • Silver

    25.33
    0.00 (0.00%)
     
  • EUR/USD

    1.1905
    +0.0031 (+0.2619%)
     
  • 10-Yr Bond

    1.6660
    +0.0340 (+2.08%)
     
  • Vix

    16.69
    -0.47 (-2.74%)
     
  • GBP/USD

    1.3708
    -0.0029 (-0.2138%)
     
  • USD/JPY

    109.6300
    -0.2000 (-0.1821%)
     
  • BTC-USD

    59,850.43
    -103.59 (-0.17%)
     
  • CMC Crypto 200

    1,235.89
    +45.20 (+3.80%)
     
  • FTSE 100

    6,915.75
    +30.43 (+0.44%)
     
  • Nikkei 225

    29,768.06
    +37.26 (+0.13%)
     

Are bpost SA/NV's (EBR:BPOST) Interest Costs Too High?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Mid-caps stocks, like bpost SA/NV (EBR:BPOST) with a market capitalization of €2.1b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Let’s take a look at BPOST’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into BPOST here.

See our latest analysis for bpost

BPOST’s Debt (And Cash Flows)

BPOST's debt levels surged from €755m to €1.0b over the last 12 months , which includes long-term debt. With this rise in debt, BPOST currently has €680m remaining in cash and short-term investments , ready to be used for running the business. On top of this, BPOST has produced cash from operations of €362m in the last twelve months, resulting in an operating cash to total debt ratio of 35%, signalling that BPOST’s operating cash is sufficient to cover its debt.

Can BPOST meet its short-term obligations with the cash in hand?

With current liabilities at €1.4b, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.01x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Logistics companies, this is a reasonable ratio as there's enough of a cash buffer without holding too much capital in low return investments.

ENXTBR:BPOST Historical Debt, April 10th 2019
ENXTBR:BPOST Historical Debt, April 10th 2019

Does BPOST face the risk of succumbing to its debt-load?

Since total debt growth have outpaced equity growth, BPOST is a highly 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 test if BPOST’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 BPOST, the ratio of 31.81x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving BPOST ample headroom to grow its debt facilities.

Next Steps:

BPOST’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Since there is also no concerns around BPOST's liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for BPOST's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research bpost to get a more holistic view of the mid-cap by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BPOST’s future growth? Take a look at our free research report of analyst consensus for BPOST’s outlook.

  2. Valuation: What is BPOST 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 BPOST is currently mispriced by the market.

  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.