Yahoo Finance How Financially Strong Is Juventus Football Club SpA (BIT:JUVE)?
Juventus Football Club SpA (BIT:JUVE) is a small-cap stock with a market capitalization of €666.64m. 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? Assessing first and foremost the financial health is crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into JUVE here.
How does JUVE’s operating cash flow stack up against its debt?
JUVE has built up its total debt levels in the last twelve months, from €232.09m to €0 , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at €153.17m , ready to deploy into the business. Moreover, JUVE has generated €76.04m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 24.80%, signalling that JUVE’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In JUVE’s case, it is able to generate 0.25x cash from its debt capital.
Can JUVE meet its short-term obligations with the cash in hand?
Looking at JUVE’s most recent €427.48m liabilities, it appears that the company is not able to meet these obligations given the level of current assets of €265.96m, with a current ratio of 0.62x below the prudent level of 3x.
Does JUVE face the risk of succumbing to its debt-load?
JUVE is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for small-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 JUVE’s case, the ratio of 5.22x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as JUVE’s high interest coverage is seen as responsible and safe practice.
Next Steps:
JUVE’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 lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how JUVE has been performing in the past. I recommend you continue to research Juventus Football Club to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for JUVE’s future growth? Take a look at our free research report of analyst consensus for JUVE’s outlook.
Historical Performance: What has JUVE’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
