Yahoo Finance Is Autogrill S.p.A.'s (BIT:AGL) Balance Sheet A Threat To Its Future?
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Mid-caps stocks, like Autogrill S.p.A. (BIT:AGL) with a market capitalization of €2.2b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. AGL’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 AGL here.
View our latest analysis for Autogrill
AGL’s Debt (And Cash Flows)
AGL has built up its total debt levels in the last twelve months, from €750m to €938m , which includes long-term debt. With this growth in debt, the current cash and short-term investment levels stands at €251m , ready to be used for running the business. Moreover, AGL has generated cash from operations of €324m over the same time period, resulting in an operating cash to total debt ratio of 35%, signalling that AGL’s operating cash is sufficient to cover its debt.
Can AGL pay its short-term liabilities?
With current liabilities at €844m, the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.7x. The current ratio is the number you get when you divide current assets by current liabilities.
Is AGL’s debt level acceptable?
AGL is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether AGL 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 AGL's, case, the ratio of 5.15x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as AGL’s high interest coverage is seen as responsible and safe practice.
Next Steps:
Although AGL’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. However, its lack of liquidity raises questions over current asset management practices for the mid-cap. Keep in mind I haven't considered other factors such as how AGL has been performing in the past. You should continue to research Autogrill to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AGL’s future growth? Take a look at our free research report of analyst consensus for AGL’s outlook.
Valuation: What is AGL 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 AGL 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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
