Is Kiriacoulis Mediterranean Cruises Shipping S.A. (ATH:KYRI) A Financially Sound Company?
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Investors are always looking for growth in small-cap stocks like Kiriacoulis Mediterranean Cruises Shipping S.A. (ATH:KYRI), with a market cap of €17m. However, an important fact which most ignore is: how financially healthy is the business? Assessing first and foremost the financial health is vital, since poor capital management may bring about 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, potential investors would need to take a closer look, and I suggest you dig deeper yourself into KYRI here.
KYRI’s Debt (And Cash Flows)
KYRI's debt levels have fallen from €11m to €8.8m over the last 12 months , which includes long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at €1.2m to keep the business going. Additionally, KYRI has produced €1.4m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 16%, meaning that KYRI’s current level of operating cash is not high enough to cover debt.
Can KYRI pay its short-term liabilities?
At the current liabilities level of €13m, it appears that the company has been able to meet these commitments with a current assets level of €23m, leading to a 1.74x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. For Hospitality companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too much capital in low return investments.
Does KYRI face the risk of succumbing to its debt-load?
KYRI is a relatively highly levered company with a debt-to-equity of 44%. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. We can check to see whether KYRI is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In KYRI's, case, the ratio of 1.86x suggests that interest is not strongly covered, which means that lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.
Next Steps:
KYRI’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 KYRI has been performing in the past. You should continue to research Kiriacoulis Mediterranean Cruises Shipping to get a better picture of the small-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for KYRI’s future growth? Take a look at our free research report of analyst consensus for KYRI’s outlook.
Historical Performance: What has KYRI'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.
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 editorial-team@simplywallst.com. 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.
