- Oops!Something went wrong.Please try again later.
VIS Containers Manufacturing Co Ltd (ATSE:VIS) is a small-cap stock with a market capitalization of €4.67M. 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 VIS is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I suggest you dig deeper yourself into VIS here.
Does VIS generate enough cash through operations?
Over the past year, VIS has maintained its debt levels at around €13.74M comprising of short- and long-term debt. At this constant level of debt, the current cash and short-term investment levels stands at €54.34K , ready to deploy into the business. On top of this, VIS has produced €916.72K in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 6.67%, indicating that VIS’s operating cash is not sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires positive earnings. In VIS’s case, it is able to generate 0.067x cash from its debt capital.
Does VIS’s liquid assets cover its short-term commitments?
At the current liabilities level of €11.61M liabilities, the company has been able to meet these obligations given the level of current assets of €14.76M, with a current ratio of 1.27x. Usually, for Packaging companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can VIS service its debt comfortably?
VIS is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since VIS is currently unprofitable, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
At its current level of cash flow coverage, VIS has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how VIS has been performing in the past. I recommend you continue to research VIS Containers Manufacturing to get a better picture of the stock by looking at:
Valuation: What is VIS 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 VIS is currently mispriced by the market.
Historical Performance: What has VIS’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.
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.