Is KEFI Minerals Plc’s (LON:KEFI) Balance Sheet Strong Enough To Weather A Storm?
While small-cap stocks, such as KEFI Minerals Plc (AIM:KEFI) with its market cap of UK£10.73M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Given that KEFI is not presently profitable, it’s crucial to understand the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into KEFI here.
Does KEFI generate an acceptable amount of cash through operations?
KEFI has built up its total debt levels in the last twelve months, from UK£334.00K to UK£427.00K , which is mainly comprised of near term debt. With this increase in debt, the current cash and short-term investment levels stands at UK£510.00K , 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of KEFI’s operating efficiency ratios such as ROA here.
Does KEFI’s liquid assets cover its short-term commitments?
At the current liabilities level of UK£2.07M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.72x. Usually, for Metals and Mining companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is KEFI’s debt level acceptable?
With a debt-to-equity ratio of 2.40%, KEFI’s debt level is relatively low. KEFI is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is virtually non-existent with KEFI, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
KEFI’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. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how KEFI has been performing in the past. I recommend you continue to research KEFI Minerals to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for KEFI’s future growth? Take a look at our free research report of analyst consensus for KEFI’s outlook.
2. Historical Performance: What has KEFI’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.
3. 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.
