All You Need To Know About Carl Zeiss Meditec AG’s (ETR:AFX) Financial Health
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Carl Zeiss Meditec AG (XTRA:AFX), with a market cap of €5.18B, are often out of the spotlight. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. AFX’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into AFX here. View our latest analysis for Carl Zeiss Meditec
How does AFX’s operating cash flow stack up against its debt?
Over the past year, AFX has reduced its debt from €8.98M to €5.81M , which is mainly comprised of near term debt. With this debt payback, AFX currently has €8.32M remaining in cash and short-term investments for investing into the business. Additionally, AFX has generated €37.73M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 648.99%, signalling that AFX’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In AFX’s case, it is able to generate 6.49x cash from its debt capital.
Can AFX pay its short-term liabilities?
With current liabilities at €316.08M, it seems that the business has been able to meet these obligations given the level of current assets of €1.21B, with a current ratio of 3.82x. However, anything about 3x may be excessive, since AFX may be leaving too much capital in low-earning investments.
Can AFX service its debt comfortably?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For Carl Zeiss Meditec, investors should not worry about its debt levels because the company has very, very little on its balance sheet! It has been operating its business with miniscule debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with AFX, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
AFX has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for AFX’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Carl Zeiss Meditec to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AFX’s future growth? Take a look at our free research report of analyst consensus for AFX’s outlook.
Valuation: What is AFX 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 AFX 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 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.
