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What does Libbey Inc’s (NYSEMKT:LBY) Balance Sheet Tell Us About Its Future?

Liliana Gabriel

Investors are always looking for growth in small-cap stocks like Libbey Inc (NYSEMKT:LBY), with a market cap of US$178.87m. However, an important fact which most ignore is: how financially healthy is the business? Consumer Durables businesses operating in the environment facing headwinds from current disruption, in particular ones that run negative earnings, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. I believe these basic checks tell most of the story you need to know. Nevertheless, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into LBY here.

How does LBY’s operating cash flow stack up against its debt?

LBY has shrunken its total debt levels in the last twelve months, from US$409.88m to US$384.60m , which is made up of current and long term debt. With this debt repayment, LBY’s cash and short-term investments stands at US$24.70m for investing into the business. Additionally, LBY has produced cash from operations of US$45.31m over the same time period, leading to an operating cash to total debt ratio of 11.78%, indicating that LBY’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In LBY’s case, it is able to generate 0.12x cash from its debt capital.

Can LBY pay its short-term liabilities?

Looking at LBY’s most recent US$165.39m liabilities, the company has been able to meet these commitments with a current assets level of US$315.13m, leading to a 1.91x current account ratio. Generally, for Consumer Durables companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

AMEX:LBY Historical Debt June 27th 18

Can LBY service its debt comfortably?

With total debt exceeding equities, LBY is considered a highly levered company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since LBY is currently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Next Steps:

At its current level of cash flow coverage, LBY has room for improvement to better cushion for events which may require debt repayment. However, 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 LBY has company-specific issues impacting its capital structure decisions. You should continue to research Libbey to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for LBY’s future growth? Take a look at our free research report of analyst consensus for LBY’s outlook.
  2. Valuation: What is LBY 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 LBY is currently mispriced by the market.
  3. 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.