Yahoo Finance Are GrandVision N.V.'s (AMS:GVNV) Interest Costs Too High?
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Mid-caps stocks, like GrandVision N.V. (AMS:GVNV) with a market capitalization of €4.8b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Today we will look at GVNV’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into GVNV here.
Check out our latest analysis for GrandVision
GVNV’s Debt (And Cash Flows)
GVNV's debt levels have fallen from €993m to €884m over the last 12 months , which also accounts for long term debt. With this reduction in debt, GVNV currently has €138m remaining in cash and short-term investments , ready to be used for running the business. Additionally, GVNV has produced cash from operations of €448m during the same period of time, leading to an operating cash to total debt ratio of 51%, indicating that GVNV’s operating cash is sufficient to cover its debt.
Can GVNV pay its short-term liabilities?
At the current liabilities level of €1.2b, the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.66x. The current ratio is the number you get when you divide current assets by current liabilities.
Can GVNV service its debt comfortably?
GVNV is a relatively highly levered company with a debt-to-equity of 71%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can test if GVNV’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For GVNV, the ratio of 47.98x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Next Steps:
GVNV’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. But, its lack of liquidity raises questions over current asset management practices for the mid-cap. This is only a rough assessment of financial health, and I'm sure GVNV has company-specific issues impacting its capital structure decisions. I recommend you continue to research GrandVision to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for GVNV’s future growth? Take a look at our free research report of analyst consensus for GVNV’s outlook.
Valuation: What is GVNV 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 GVNV 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.
