What does TAG Immobilien AG’s (FRA:TEG) Balance Sheet Tell Us About Its Future?
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like TAG Immobilien AG (DB:TEG), with a market cap of €2.35B, are often out of the spotlight. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine TEG’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into TEG here. View our latest analysis for TAG Immobilien
How does TEG’s operating cash flow stack up against its debt?
TEG’s debt levels surged from €2.27B to €2.52B over the last 12 months – this includes both the current and long-term debt. With this growth in debt, TEG currently has €263.67M remaining in cash and short-term investments , ready to deploy into the business. Additionally, TEG has generated €124.47M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 4.94%, signalling that TEG’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In TEG’s case, it is able to generate 0.049x cash from its debt capital.
Can TEG pay its short-term liabilities?
At the current liabilities level of €369.77M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of €390.74M, with a current ratio of 1.06x. For Real Estate companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does TEG face the risk of succumbing to its debt-load?
Since total debt levels have outpaced equities, TEG is a highly leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether TEG 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 TEG’s, case, the ratio of 2.33x suggests that interest is not strongly covered, which means that lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.
Next Steps:
TEG’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 an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for TEG’s financial health. Other important fundamentals need to be considered alongside. You should continue to research TAG Immobilien to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TEG’s future growth? Take a look at our free research report of analyst consensus for TEG’s outlook.
Valuation: What is TEG 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 TEG 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 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.
