Is Jubilee Metals Group PLC’s (LON:JLP) Balance Sheet Strong Enough To Weather A Storm?
Investors are always looking for growth in small-cap stocks like Jubilee Metals Group PLC (AIM:JLP), with a market cap of £44.45M. However, an important fact which most ignore is: how financially healthy is the business? Since JLP is loss-making right now, it’s essential to evaluate 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. Though, this commentary is still very high-level, so I suggest you dig deeper yourself into JLP here.
How does JLP’s operating cash flow stack up against its debt?
In the previous 12 months, JLP’s rose by about £3.8M made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at £4.6M , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of JLP’s operating efficiency ratios such as ROA here.
Does JLP’s liquid assets cover its short-term commitments?
Looking at JLP’s most recent £6.8M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.16x. For Metals and Mining companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can JLP service its debt comfortably?
JLP’s level of debt is low relative to its total equity, at 6.69%. This range is considered safe as JLP is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for JLP, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
JLP’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how JLP has been performing in the past. I suggest you continue to research Jubilee Metals Group to get a more holistic view of the stock by looking at:
1. Historical Performance: What has JLP’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.
