What Investors Should Know About Unimot SA’s (WSE:UNT) Financial Strength
While small-cap stocks, such as Unimot SA (WSE:UNT) with its market cap of zł79.19m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Oil and Gas industry, even ones that are profitable, are inclined towards being higher risk. So, understanding the company’s financial health becomes crucial. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into UNT here.
Does UNT produce enough cash relative to debt?
UNT’s debt levels have fallen from zł189.53m to zł155.96m over the last 12 months , which is made up of current and long term debt. With this reduction in debt, UNT’s cash and short-term investments stands at zł23.59m , ready to deploy into the business. On top of this, UNT has generated zł48.68m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 31.21%, signalling that UNT’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In UNT’s case, it is able to generate 0.31x cash from its debt capital.
Does UNT’s liquid assets cover its short-term commitments?
With current liabilities at zł391.48m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.37x. Generally, for Oil and Gas companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Is UNT’s debt level acceptable?
With a debt-to-equity ratio of 78.19%, UNT can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
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. I recommend you continue to research Unimot to get a more holistic view 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.
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.
