Investors are always looking for growth in small-cap stocks like Astro Spólka Akcyjna (WSE:ASR), with a market cap of ZŁ18.44M. However, an important fact which most ignore is: how financially healthy is the business? Since ASR is loss-making right now, 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. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into ASR here.
Does ASR generate enough cash through operations?
ASR has built up its total debt levels in the last twelve months, from ZŁ2.93M to ZŁ5.36M , which comprises of short- and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at ZŁ948.26K , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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 take a look at some of ASR’s operating efficiency ratios such as ROA here.
Can ASR meet its short-term obligations with the cash in hand?
At the current liabilities level of ZŁ1.12M liabilities, the company has been able to meet these obligations given the level of current assets of ZŁ5.38M, with a current ratio of 4.8x. However, anything above 3x is considered high and could mean that ASR has too much idle capital in low-earning investments.
Can ASR service its debt comfortably?
With a debt-to-equity ratio of 60.14%, ASR 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. Though, since ASR is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
At its current level of cash flow coverage, ASR has room for improvement to better cushion for events which may require debt repayment. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for ASR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Astro Spólka Akcyjna to get a better picture of the stock by looking at:
- 1. Historical Performance: What has ASR’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.
- 2. 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 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.