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Does Everyman Media Group plc’s (AIM:EMAN) Debt Level Pose A Serious Problem?

While small-cap stocks, such as Everyman Media Group plc (AIM:EMAN) with its market cap of GBP £138.11M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. The significance of doing due diligence on a company’s financial strength stems from the fact that over 20,000 companies go bankrupt in every quarter in the US alone. These factors make a basic understanding of a company’s financial position of utmost importance for a potential investor. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Check out our latest analysis for Everyman Media Group

Does EMAN generate enough cash through operations?

AIM:EMAN Historical Debt Oct 28th 17
AIM:EMAN Historical Debt Oct 28th 17

There are many headwinds that come unannounced, such as natural disasters and political turmoil, which can challenge a small business and its ability to adapt and recover. These adverse events bring devastation and yet does not absolve the company from its debt. Fortunately, we can test the company’s capacity to pay back its debtholders without summoning any catastrophes by looking at how much cash it generates from its current operations. Last year, EMAN’s operating cash flow exceeded its debt obligations, which means EMAN generates enough money in a year through its operations to pay off its near-term debt. Hence, debt poses a virtually insignificant risk for the company. This reflects proper cash and debt management by the company – great news for both debtholders and shareholders.

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

What about its other commitments such as payments to suppliers and salaries to its employees? As cash flow from operation is hindered by adverse events, EMAN may need to liquidate its short-term assets to meet these upcoming payments. We test for EMAN’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that EMAN does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.

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

A substantially higher debt poses a significant threat to a company’s profitability during a downturn. EMAN’s debt-to-equity ratio stands at 14.99%, which means its debt level does not pose a threat to its operations right now.

Next Steps:

Are you a shareholder? EMAN has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. But it is still important for shareholders to understand why the company isn’t increasing its cheaper cost of capital to fund future growth, especially if meeting short-term obligations could also bring about issues. I recommend taking a look at EMAN’s future growth analysis on our free platform. to account for what the market expects for the company moving forward.

Are you a potential investor? EMAN’s high cash coverage and low levels of debt indicate its ability to use its borrowings efficiently in order to produce a healthy cash flow. Although, should adverse events arise, its low liquidity raises concerns over whether short term obligations can be met in time. I encourage you to continue your research by taking a look at EMAN’s past performance analysis on our free platform to figure out EMAN’s financial health position.


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.

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