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Auplata S.A. (EPA:ALAUP) is a small-cap stock with a market capitalization of €31m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that ALAUP is not presently profitable, it’s essential to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into ALAUP here.
Does ALAUP produce enough cash relative to debt?
ALAUP has built up its total debt levels in the last twelve months, from €5.7m to €12m , which includes long-term debt. With this growth in debt, ALAUP currently has €1.8m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of ALAUP’s operating efficiency ratios such as ROA here.
Can ALAUP meet its short-term obligations with the cash in hand?
At the current liabilities level of €24m, it seems that the business may not be able to easily meet these obligations given the level of current assets of €17m, with a current ratio of 0.7x.
Can ALAUP service its debt comfortably?
With a debt-to-equity ratio of 16%, ALAUP’s debt level may be seen as prudent. This range is considered safe as ALAUP is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with ALAUP, and the company has plenty of headroom and ability to raise debt should it need to in the future.
ALAUP 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 when liquidity may also be an issue. Keep in mind I haven’t considered other factors such as how ALAUP has been performing in the past. I recommend you continue to research Auplata to get a better picture of the stock by looking at:
- Historical Performance: What has ALAUP’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.
- 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 firstname.lastname@example.org.