TESGAS Spólka Akcyjna (WSE:TSG): Time For A Financial Health Check
Investors are always looking for growth in small-cap stocks like TESGAS Spólka Akcyjna (WSE:TSG), with a market cap of ZŁ21.91M. However, an important fact which most ignore is: how financially healthy is the business? Given that TSG is not presently profitable, it’s essential 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. Nevertheless, this commentary is still very high-level, so I recommend you dig deeper yourself into TSG here.
How does TSG’s operating cash flow stack up against its debt?
TSG’s debt levels have fallen from ZŁ12.66M to ZŁ7.98M over the last 12 months , which comprises of short- and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at ZŁ17.25M for investing 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of TSG’s operating efficiency ratios such as ROA here.
Can TSG meet its short-term obligations with the cash in hand?
Looking at TSG’s most recent ZŁ17.11M liabilities, the company has been able to meet these commitments with a current assets level of ZŁ48.09M, leading to a 2.81x current account ratio. Generally, for Gas Utilities companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can TSG service its debt comfortably?
With debt at 10.28% of equity, TSG may be thought of as appropriately levered. TSG is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with TSG, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
TSG’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 exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how TSG has been performing in the past. I recommend you continue to research TESGAS Spólka Akcyjna to get a better picture of the stock by looking at:
1. Valuation: What is TSG 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 TSG is currently mispriced by the market.
2. Historical Performance: What has TSG’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.
3. 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.
