Investors are always looking for growth in small-cap stocks like Unimot S.A. (WSE:UNT), with a market cap of zł105m. However, an important fact which most ignore is: how financially healthy is the business? Understanding the company's financial health becomes essential, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Let's work through some financial health checks you may wish to consider if you're interested in this stock. However, this is not a comprehensive overview, so I recommend you dig deeper yourself into UNT here.
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Does UNT Produce Much Cash Relative To Its Debt?
UNT's debt levels surged from zł156m to zł229m over the last 12 months , which includes long-term debt. With this increase in debt, UNT currently has zł47m remaining in cash and short-term investments to keep the business going. Moving on, operating cash flow was negative over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can take a look at some of UNT’s operating efficiency ratios such as ROA here.
Does UNT’s liquid assets cover its short-term commitments?
With current liabilities at zł396m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.33x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Oil and Gas companies, this is a reasonable ratio as there's enough of a cash buffer without holding too much capital in low return investments.
Can UNT service its debt comfortably?
UNT is a highly-leveraged company with debt exceeding equity by over 100%. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies.
UNT’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Keep in mind I haven't considered other factors such as how UNT has been performing in the past. You should continue to research Unimot to get a better picture of the small-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for UNT’s future growth? Take a look at our free research report of analyst consensus for UNT’s outlook.
- Valuation: What is UNT 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 UNT 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.