Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Public Joint Stock Company ALROSA (MCX:ALRS) with a market-capitalization of RUруб614b, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. ALRS’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into ALRS here.
ALRS’s Debt (And Cash Flows)
ALRS has built up its total debt levels in the last twelve months, from RUруб59b to RUруб107b , which includes long-term debt. With this increase in debt, the current cash and short-term investment levels stands at RUруб68b to keep the business going. Moreover, ALRS has generated RUруб104b in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 98%, indicating that ALRS’s operating cash is sufficient to cover its debt.
Can ALRS meet its short-term obligations with the cash in hand?
At the current liabilities level of RUруб77b, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.29x. The current ratio is the number you get when you divide current assets by current liabilities. For Metals and Mining companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too much capital in low return investments.
Does ALRS face the risk of succumbing to its debt-load?
ALRS’s level of debt is appropriate relative to its total equity, at 39%. This range is considered safe as ALRS is not taking on too much debt obligation, which may be constraining for future growth. We can check to see whether ALRS 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 ALRS's, case, the ratio of 22.84x 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.
ALRS’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, 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 ALRS has company-specific issues impacting its capital structure decisions. You should continue to research ALROSA to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ALRS’s future growth? Take a look at our free research report of analyst consensus for ALRS’s outlook.
- Valuation: What is ALRS 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 ALRS 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.