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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Métropole Télévision S.A. (EPA:MMT) with a market-capitalization of €2.2b, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. This article will examine MMT’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Métropole Télévision's financial health, so you should conduct further analysis into MMT here.
Does MMT Produce Much Cash Relative To Its Debt?
Over the past year, MMT has reduced its debt from €88m to €52m , which includes long-term debt. With this debt payback, the current cash and short-term investment levels stands at €133m to keep the business going. On top of this, MMT has generated €281m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 541%, indicating that MMT’s debt is appropriately covered by operating cash.
Does MMT’s liquid assets cover its short-term commitments?
With current liabilities at €667m, it appears that the company has been able to meet these obligations given the level of current assets of €953m, with a current ratio of 1.43x. The current ratio is the number you get when you divide current assets by current liabilities. For Media companies, this ratio is within a sensible range since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is MMT’s debt level acceptable?
With debt at 7.2% of equity, MMT may be thought of as having low leverage. This range is considered safe as MMT is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether MMT is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In MMT's, case, the ratio of 890x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
MMT has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I'm sure MMT has company-specific issues impacting its capital structure decisions. I recommend you continue to research Métropole Télévision to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MMT’s future growth? Take a look at our free research report of analyst consensus for MMT’s outlook.
- Valuation: What is MMT 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 MMT 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.