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How Financially Strong Is Grupa RECYKL SA. (WSE:GRC)?

Investors are always looking for growth in small-cap stocks like Grupa RECYKL SA. (WSE:GRC), with a market cap of ZŁ34.14M. However, an important fact which most ignore is: how financially healthy is the business? Evaluating financial health as part of your investment thesis is essential, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into GRC here.

Does GRC generate enough cash through operations?

GRC has sustained its debt level by about ZŁ13.34M over the last 12 months comprising of short- and long-term debt. At this current level of debt, GRC currently has ZŁ567.09K remaining in cash and short-term investments for investing into the business. On top of this, GRC has generated ZŁ6.13M in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 45.96%, signalling that GRC’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In GRC’s case, it is able to generate 0.46x cash from its debt capital.

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

Looking at GRC’s most recent ZŁ26.68M liabilities, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.58x, which is below the prudent industry ratio of 3x.

WSE:GRC Historical Debt Apr 4th 18
WSE:GRC Historical Debt Apr 4th 18

Can GRC service its debt comfortably?

GRC is a relatively highly levered company with a debt-to-equity of 89.24%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if GRC’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For GRC, the ratio of 5.31x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

Although GRC’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. But, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for GRC’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Grupa RECYKL to get a more holistic view of the stock by looking at:


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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