Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Scout24 AG (DB:G24), with a market cap of €4.99B, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at G24’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into G24 here. Check out our latest analysis for Scout24
Does G24 generate an acceptable amount of cash through operations?
G24 has shrunken its total debt levels in the last twelve months, from €677.37M to €617.55M , which is made up of current and long term debt. With this reduction in debt, the current cash and short-term investment levels stands at €56.66M for investing into the business. On top of this, G24 has generated cash from operations of €164.23M during the same period of time, leading to an operating cash to total debt ratio of 26.59%, signalling that G24’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In G24’s case, it is able to generate 0.27x cash from its debt capital.
Can G24 meet its short-term obligations with the cash in hand?
Looking at G24’s most recent €159.19M liabilities, it appears that the company has not been able to meet these commitments with a current assets level of €115.28M, leading to a 0.72x current account ratio. which is under the appropriate industry ratio of 3x.
Can G24 service its debt comfortably?
With a debt-to-equity ratio of 56.70%, G24 can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In G24’s case, the ratio of 13.46x 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.
G24’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. But, 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 G24 has company-specific issues impacting its capital structure decisions. I recommend you continue to research Scout24 to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for G24’s future growth? Take a look at our free research report of analyst consensus for G24’s outlook.
- Valuation: What is G24 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 G24 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.