Are Vistal Gdynia SA.’s (WSE:VTL) Interest Costs Too High?
Investors are always looking for growth in small-cap stocks like Vistal Gdynia SA. (WSE:VTL), with a market cap of ZŁ13.78M. However, an important fact which most ignore is: how financially healthy is the business? Since VTL is loss-making right now, it’s essential to assess 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, since I only look at basic financial figures, I suggest you dig deeper yourself into VTL here.
Does VTL generate an acceptable amount of cash through operations?
Over the past year, VTL has ramped up its debt from ZŁ222.84M to ZŁ304.39M – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at ZŁ31.56M , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of VTL’s operating efficiency ratios such as ROA here.
Does VTL’s liquid assets cover its short-term commitments?
At the current liabilities level of ZŁ354.74M liabilities, it seems that the business has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.98x, which is below the prudent industry ratio of 3x.
Can VTL service its debt comfortably?
Since total debt levels have outpaced equities, VTL is a highly leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since VTL is currently loss-making, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
With a high level of debt on its balance sheet, VTL could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for VTL to increase its operational efficiency. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I’m sure VTL has company-specific issues impacting its capital structure decisions. You should continue to research Vistal Gdynia to get a better picture of the stock by looking at:
Historical Performance: What has VTL’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.
