With a market capitalization of €26b, KONE Oyj (HEL:KNEBV) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high liquidity, which means there's plenty of stocks available to the public for trading. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Today I will analyse the latest financial data for KNEBV to determine is solvency and liquidity and whether the stock is a sound investment.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Does KNEBV Produce Much Cash Relative To Its Debt?
KNEBV's debt levels surged from €226m to €569m over the last 12 months , which accounts for long term debt. With this growth in debt, KNEBV's cash and short-term investments stands at €1.6b , ready to be used for running the business. On top of this, KNEBV has produced €1.2b in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 204%, indicating that KNEBV’s operating cash is sufficient to cover its debt.
Does KNEBV’s liquid assets cover its short-term commitments?
Looking at KNEBV’s €4.5b in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.11x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Machinery companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is KNEBV’s debt level acceptable?
KNEBV’s level of debt is appropriate relative to its total equity, at 24%. This range is considered safe as KNEBV is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
KNEBV’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven't considered other factors such as how KNEBV has been performing in the past. I suggest you continue to research KONE Oyj to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KNEBV’s future growth? Take a look at our free research report of analyst consensus for KNEBV’s outlook.
- Valuation: What is KNEBV 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 KNEBV 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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.