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What does BEST SA.’s (WSE:BST) Balance Sheet Tell Us About Its Future?

Jonathon Baker

Investors are always looking for growth in small-cap stocks like BEST SA. (WSE:BST), with a market cap of ZŁ699.65M. However, an important fact which most ignore is: how financially healthy is the business? Assessing first and foremost the financial health is vital, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. 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 recommend you dig deeper yourself into BST here.

How does BST’s operating cash flow stack up against its debt?

BST has built up its total debt levels in the last twelve months, from ZŁ503.95M to ZŁ760.02M , which comprises of short- and long-term debt. With this increase in debt, BST currently has ZŁ251.38M 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 examine some of BST’s operating efficiency ratios such as ROA here.

Does BST’s liquid assets cover its short-term commitments?

Looking at BST’s most recent ZŁ282.74M liabilities, it seems that the business has not been able to meet these commitments with a current assets level of ZŁ279.37M, leading to a 0.99x current account ratio. which is under the appropriate industry ratio of 3x.

WSE:BST Historical Debt Apr 30th 18
WSE:BST Historical Debt Apr 30th 18

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

With total debt exceeding equities, BST is considered a highly levered company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether BST 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 BST’s, case, the ratio of 2.61x suggests that interest is not strongly covered, which means that lenders may be more reluctant to lend out more funding as BST’s low interest coverage already puts the company at higher risk of default.

Next Steps:

BST’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for BST’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research BEST to get a better picture of the stock by looking at:

  1. Valuation: What is BST 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 BST is currently mispriced by the market.

  2. Historical Performance: What has BST’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.