All You Need To Know About Soitec SA’s (EPA:SOI) Financial Health
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Soitec SA (EPA:SOI), with a market cap of €2.57b, are often out of the spotlight. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at SOI’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into SOI here. View out our latest analysis for Soitec
Does SOI produce enough cash relative to debt?
Over the past year, SOI has reduced its debt from €120.86m to €78.20m , which comprises of short- and long-term debt. With this reduction in debt, SOI currently has €132.80m remaining in cash and short-term investments , ready to deploy into the business. On top of this, SOI has produced €35.10m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 44.88%, signalling that SOI’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In SOI’s case, it is able to generate 0.45x cash from its debt capital.
Can SOI meet its short-term obligations with the cash in hand?
With current liabilities at €130.00m, it seems that the business has been able to meet these obligations given the level of current assets of €264.30m, with a current ratio of 2.03x. For Semiconductor companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is SOI’s debt level acceptable?
With a debt-to-equity ratio of 28.07%, SOI’s debt level may be seen as prudent. This range is considered safe as SOI is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
SOI’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for SOI’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Soitec to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SOI’s future growth? Take a look at our free research report of analyst consensus for SOI’s outlook.
Valuation: What is SOI 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 SOI 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.
