What You Must Know About Shefa Yamim (AT.M.) Ltd.’s (LON:SEFA) Financial Strength
Shefa Yamim (AT.M.) Ltd. (LSE:SEFA) is a small-cap stock with a market capitalization of UK£14.95M. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Since SEFA is loss-making right now, it’s crucial to understand the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into SEFA here.
Does SEFA generate an acceptable amount of cash through operations?
Over the past year, SEFA has ramped up its debt from ₪1.77M to ₪2.40M , which is made up of current and long term debt. With this increase in debt, SEFA’s cash and short-term investments stands at ₪193.00K , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of SEFA’s operating efficiency ratios such as ROA here.
Does SEFA’s liquid assets cover its short-term commitments?
Looking at SEFA’s most recent ₪6.22M liabilities, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.077x, which is below the prudent industry ratio of 3x.
Can SEFA service its debt comfortably?
With debt at 7.24% of equity, SEFA may be thought of as having low leverage. This range is considered safe as SEFA is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is virtually non-existent with SEFA, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
Although SEFA’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for SEFA’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Shefa Yamim (A.T.M.) to get a better picture of the stock by looking at:
1. Historical Performance: What has SEFA’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. 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.
