Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    +1.76 (+2.16%)
     
  • Gold

    2,254.80
    +42.10 (+1.90%)
     
  • Silver

    25.10
    +0.35 (+1.41%)
     
  • EUR/USD

    1.0793
    -0.0036 (-0.33%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2623
    -0.0015 (-0.12%)
     
  • USD/JPY

    151.3580
    +0.1120 (+0.07%)
     
  • Bitcoin USD

    70,836.66
    +1,639.02 (+2.37%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

How Financially Strong Is Eden Innovations Ltd (ASX:EDE)?

Investors are always looking for growth in small-cap stocks like Eden Innovations Ltd (ASX:EDE), with a market cap of AUD A$164.56M. However, an important fact which most ignore is: how financially healthy is the company? Why is it important? A major downturn in the energy industry has resulted in over 150 companies going bankrupt and has put more than 100 on the verge of a collapse, primarily due to excessive debt. Here are few basic financial health checks to judge whether a company fits the bill or there is an additional risk which you should consider before taking the plunge. See our latest analysis for EDE

How does EDE’s operating cash flow stack up against its debt?

ASX:EDE Historical Debt Nov 10th 17
ASX:EDE Historical Debt Nov 10th 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. Can EDE pay off what it owes to its debtholder by using only cash from its operational activities? Last year, EDE’s operating cash flow was -6.16x its current debt. This means what EDE can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at EDE’s operations at this point in time.

Does EDE’s liquid assets cover its short-term commitments?

In addition to debtholders, a company must be able to pay its bills and salaries to keep the business running. During times of unfavourable events, EDE could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We should examine if the company’s cash and short-term investment levels match its current liabilities. Our analysis shows that EDE is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.

Is EDE’s level of debt at an acceptable level?

Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. In the case of EDE, the debt-to-equity ratio is 7.01%, which indicates that the company faces low risk associated with debt.

Next Steps:

Are you a shareholder? EDE’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may change. I suggest researching market expectations for EDE’s future growth on our free analysis platform.

Are you a potential investor? Eden Innovations currently has financial flexibility to ramp up growth in the future. Moreover, its high liquidity ensures the company will continue to operate smoothly should unfavourable circumstances arise. In order to build your confidence in the stock, you need to also examine the company’s track record. I encourage you to continue your research by taking a look at EDE’s past performance analysis on our free platform to conclude on EDE’s financial health.


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.

Advertisement