What You Must Know About Albany International Corp.’s (NYSE:AIN) Financial Strength
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Albany International Corp. (NYSE:AIN) with a market-capitalization of US$2.2b, rarely draw their attention. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. AIN’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into AIN here.
See our latest analysis for Albany International
How much cash does AIN generate through its operations?
AIN’s debt level has been constant at around US$530m over the previous year including long-term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$161m for investing into the business. Additionally, AIN has generated cash from operations of US$104m over the same time period, resulting in an operating cash to total debt ratio of 20%, signalling that AIN’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In AIN’s case, it is able to generate 0.2x cash from its debt capital.
Can AIN pay its short-term liabilities?
At the current liabilities level of US$206m, it seems that the business has been able to meet these obligations given the level of current assets of US$596m, with a current ratio of 2.9x. Generally, for Machinery companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Does AIN face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 87%, AIN can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if AIN’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For AIN, the ratio of 8.15x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving AIN ample headroom to grow its debt facilities.
Next Steps:
Although AIN’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around AIN’s liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I’m sure AIN has company-specific issues impacting its capital structure decisions. I suggest you continue to research Albany International to get a more holistic view of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for AIN’s future growth? Take a look at our free research report of analyst consensus for AIN’s outlook.
Valuation: What is AIN 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 AIN 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
