How Financially Strong Is Delta Drone SA (EPA:ALDR)?
Investors are always looking for growth in small-cap stocks like Delta Drone SA (EPA:ALDR), with a market cap of €18.7m. However, an important fact which most ignore is: how financially healthy is the business? Given that ALDR is not presently profitable, it’s vital to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into ALDR here.
How much cash does ALDR generate through its operations?
ALDR’s debt levels surged from €2.8m to €4.8m over the last 12 months , which is made up of current and long term debt. With this growth in debt, ALDR currently has €2.1m remaining in cash and short-term investments for investing 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 take a look at some of ALDR’s operating efficiency ratios such as ROA here.
Can ALDR meet its short-term obligations with the cash in hand?
At the current liabilities level of €5.0m liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.31x. For Aerospace & Defense companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can ALDR service its debt comfortably?
With a debt-to-equity ratio of 78.3%, ALDR can be considered as an above-average leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since ALDR is currently loss-making, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
ALDR’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. Keep in mind I haven’t considered other factors such as how ALDR has been performing in the past. I suggest you continue to research Delta Drone to get a better picture of the stock by looking at:
Historical Performance: What has ALDR’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 editorial-team@simplywallst.com.
