Investors are always looking for growth in small-cap stocks like Remor Solar Polska SA. (WSE:RSP), with a market cap of ZŁ2.27M. However, an important fact which most ignore is: how financially healthy is the business? Given that RSP is not presently profitable, it’s essential to evaluate the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, this commentary is still very high-level, so I suggest you dig deeper yourself into RSP here.
How does RSP’s operating cash flow stack up against its debt?
Over the past year, RSP has ramped up its debt from ZŁ334.44K to ZŁ1.38M – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at ZŁ1.08M , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of RSP’s operating efficiency ratios such as ROA here.
Can RSP pay its short-term liabilities?
Looking at RSP’s most recent ZŁ129.34K liabilities, it seems that the business has been able to meet these obligations given the level of current assets of ZŁ2.23M, with a current ratio of 17.23x. However, a ratio greater than 3x may be considered as too high, as RSP could be holding too much capital in a low-return investment environment.
Is RSP’s debt level acceptable?
With a debt-to-equity ratio of 28.51%, RSP’s debt level may be seen as prudent. RSP is not taking on too much debt commitment, which may be constraining for future growth. RSP’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
RSP’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure RSP has company-specific issues impacting its capital structure decisions. I suggest you continue to research Remor Solar Polska to get a more holistic view of the stock by looking at:
- 1. Historical Performance: What has RSP’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.