While small-cap stocks, such as Diebold Nixdorf AG (ETR:WIN) with its market cap of €1.68b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Tech industry, even ones that are profitable, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, this commentary is still very high-level, so I recommend you dig deeper yourself into WIN here.
How much cash does WIN generate through its operations?
WIN’s debt levels surged from €144.3m to €228.7m over the last 12 months , which comprises of short- and long-term debt. With this rise in debt, WIN currently has €120.7m remaining in cash and short-term investments , ready to deploy into the business. On top of this, WIN has generated €292.2m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 128%, signalling that WIN’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In WIN’s case, it is able to generate 1.28x cash from its debt capital.
Does WIN’s liquid assets cover its short-term commitments?
Looking at WIN’s most recent €1.01b liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.95x, which is below the prudent industry ratio of 3x.
Is WIN’s debt level acceptable?
With a debt-to-equity ratio of 52.8%, WIN can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
WIN’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. However, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for WIN’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Diebold Nixdorf to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WIN’s future growth? Take a look at our free research report of analyst consensus for WIN’s outlook.
- Valuation: What is WIN 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 WIN 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 past 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. For errors that warrant correction please contact the editor at email@example.com.