Yahoo Finance Is Celtic plc’s (LON:CCP) Balance Sheet A Threat To Its Future?
Celtic plc (LON:CCP) is a small-cap stock with a market capitalization of UK£122.82m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Evaluating financial health as part of your investment thesis is crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into CCP here.
How much cash does CCP generate through its operations?
CCP’s debt level has been constant at around UK£10.99m over the previous year made up of current and long term debt. At this stable level of debt, CCP currently has UK£24.51m remaining in cash and short-term investments , ready to deploy into the business. Additionally, CCP has generated cash from operations of UK£16.00m over the same time period, leading to an operating cash to total debt ratio of 145.61%, meaning that CCP’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In CCP’s case, it is able to generate 1.46x cash from its debt capital.
Can CCP meet its short-term obligations with the cash in hand?
At the current liabilities level of UK£33.76m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of UK£39.20m, with a current ratio of 1.16x. For Media 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 CCP’s debt level acceptable?
CCP’s level of debt is appropriate relative to its total equity, at 14.52%. CCP is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether CCP 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 CCP’s, case, the ratio of 11.07x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving CCP ample headroom to grow its debt facilities.
Next Steps:
CCP has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how CCP has been performing in the past. I recommend you continue to research Celtic to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CCP’s future growth? Take a look at our free research report of analyst consensus for CCP’s outlook.
Valuation: What is CCP 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 CCP 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 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.
