Yahoo Finance Is Ascential plc (LON:ASCL) A Financially Sound Company?
Mid-caps stocks, like Ascential plc (LON:ASCL) with a market capitalization of UK£1.67b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. ASCL’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into ASCL here.
Check out our latest analysis for Ascential
Does ASCL produce enough cash relative to debt?
ASCL’s debt levels surged from UK£286.3m to UK£332.0m over the last 12 months , which comprises of short- and long-term debt. With this rise in debt, ASCL currently has UK£46.9m remaining in cash and short-term investments , ready to deploy into the business. Additionally, ASCL has produced cash from operations of UK£78.7m over the same time period, resulting in an operating cash to total debt ratio of 23.7%, meaning that ASCL’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In ASCL’s case, it is able to generate 0.24x cash from its debt capital.
Does ASCL’s liquid assets cover its short-term commitments?
At the current liabilities level of UK£230.6m liabilities, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.97x, which is below the prudent industry ratio of 3x.
Can ASCL service its debt comfortably?
With a debt-to-equity ratio of 92.1%, ASCL 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 ASCL’s case, the ratio of 10.07x 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.
Next Steps:
ASCL’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. This is only a rough assessment of financial health, and I’m sure ASCL has company-specific issues impacting its capital structure decisions. I recommend you continue to research Ascential to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ASCL’s future growth? Take a look at our free research report of analyst consensus for ASCL’s outlook.
Valuation: What is ASCL 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 ASCL 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
