Yahoo Finance Has Bellway p.l.c. (LON:BWY) Got Enough Cash?
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Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Bellway p.l.c. (LON:BWY), with a market cap of UK£3.4b, often get neglected by retail investors. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at BWY’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into BWY here.
View our latest analysis for Bellway
BWY’s Debt (And Cash Flows)
BWY has shrunk its total debt levels in the last twelve months, from UK£168m to UK£60m made up of predominantly near term debt. With this reduction in debt, BWY's cash and short-term investments stands at UK£33m , ready to be used for running the business. Moreover, BWY has generated UK£288m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 479%, indicating that BWY’s operating cash is sufficient to cover its debt.
Can BWY meet its short-term obligations with the cash in hand?
With current liabilities at UK£848m, the company has been able to meet these commitments with a current assets level of UK£3.6b, leading to a 4.21x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. However, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.
Does BWY face the risk of succumbing to its debt-load?
With debt at 2.2% of equity, BWY may be thought of as having low leverage. BWY is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether BWY 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 BWY's, case, the ratio of 46.42x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as BWY’s high interest coverage is seen as responsible and safe practice.
Next Steps:
BWY’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I'm sure BWY has company-specific issues impacting its capital structure decisions. You should continue to research Bellway to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BWY’s future growth? Take a look at our free research report of analyst consensus for BWY’s outlook.
Valuation: What is BWY 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 BWY 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.
