Has Nemetschek SE (ETR:NEM) Got Enough Cash?
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Nemetschek SE (XTRA:NEM), with a market cap of €4.05B, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at NEM’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into NEM here. Check out our latest analysis for Nemetschek
Does NEM generate enough cash through operations?
NEM has shrunken its total debt levels in the last twelve months, from €96.23M to €79.95M – this includes both the current and long-term debt. With this reduction in debt, NEM’s cash and short-term investments stands at €104.07M , ready to deploy into the business. Additionally, NEM has generated cash from operations of €97.42M over the same time period, resulting in an operating cash to total debt ratio of 121.85%, meaning that NEM’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In NEM’s case, it is able to generate 1.22x cash from its debt capital.
Can NEM meet its short-term obligations with the cash in hand?
Looking at NEM’s most recent €165.75M liabilities, the company has not been able to meet these commitments with a current assets level of €159.07M, leading to a 0.96x current account ratio. which is under the appropriate industry ratio of 3x.
Is NEM’s debt level acceptable?
NEM’s level of debt is appropriate relative to its total equity, at 30.38%. NEM is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether NEM 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 NEM’s, case, the ratio of 136x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as NEM’s high interest coverage is seen as responsible and safe practice.
Next Steps:
NEM has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Though its lack of liquidity raises questions over current asset management practices for the mid-cap. This is only a rough assessment of financial health, and I’m sure NEM has company-specific issues impacting its capital structure decisions. I suggest you continue to research Nemetschek to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for NEM’s future growth? Take a look at our free research report of analyst consensus for NEM’s outlook.
Valuation: What is NEM 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 NEM 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 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.
