Is Moncler S.p.A. (BIT:MONC) A Financially Strong Company?
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Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Moncler S.p.A. (BIT:MONC). With a market valuation of €9.6b, MONC is a safe haven in times of market uncertainty due to its strong balance sheet. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Assessing the most recent data for MONC, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity.
Check out our latest analysis for Moncler
Does MONC Produce Much Cash Relative To Its Debt?
Over the past year, MONC has maintained its debt levels at around €96m which accounts for long term debt. At this constant level of debt, MONC currently has €546m remaining in cash and short-term investments , ready to be used for running the business. Moreover, MONC has generated cash from operations of €466m during the same period of time, resulting in an operating cash to total debt ratio of 483%, meaning that MONC’s debt is appropriately covered by operating cash.
Does MONC’s liquid assets cover its short-term commitments?
With current liabilities at €377m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.4x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Luxury companies, this is a suitable ratio since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is MONC’s debt level acceptable?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. With a debt-to-equity ratio of 9.0%, MONC's debt level is relatively low. MONC is not taking on too much debt commitment, which may be constraining for future growth. We can test if MONC’s debt levels are sustainable by measuring interest payments against earnings of a company. As a rule of thumb, a company should have earnings before interest and tax (EBIT) of at least three times the size of net interest. For MONC, the ratio of 719x suggests that interest is comfortably covered. Large-cap investments like MONC are often believed to be a safe investment due to their ability to pump out ample earnings multiple times its interest payments.
Next Steps:
MONC’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn't a big surprise for a large-cap. This is only a rough assessment of financial health, and I'm sure MONC has company-specific issues impacting its capital structure decisions. I recommend you continue to research Moncler to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MONC’s future growth? Take a look at our free research report of analyst consensus for MONC’s outlook.
Valuation: What is MONC 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 MONC 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 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.
