Yahoo Finance Is Agriterra Limited (LON:AGTA) A Financially Sound Company?
While small-cap stocks, such as Agriterra Limited (AIM:AGTA) with its market cap of UK£3.29M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since AGTA is loss-making right now, it’s essential to understand 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’d encourage you to dig deeper yourself into AGTA here.
Does AGTA generate enough cash through operations?
Over the past year, AGTA has ramped up its debt from US$2.92M to US$3.46M , which is made up of current and long term debt. With this rise in debt, AGTA currently has US$2.43M remaining in cash and short-term investments 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 AGTA’s operating efficiency ratios such as ROA here.
Does AGTA’s liquid assets cover its short-term commitments?
At the current liabilities level of US$3.49M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.88x. For Food companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Is AGTA’s debt level acceptable?
AGTA is a relatively highly levered company with a debt-to-equity of 41.11%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since AGTA is currently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
At its current level of cash flow coverage, AGTA has room for improvement to better cushion for events which may require debt repayment. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how AGTA has been performing in the past. I suggest you continue to research Agriterra to get a better picture of the stock by looking at:
Historical Performance: What has AGTA’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.
