Yahoo Finance Is Greek Organization of Football Prognostics SA (ATH:OPAP) A Financially Sound Company?
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Greek Organization of Football Prognostics SA (ATH:OPAP), with a market capitalization of €3.00b, rarely draw their attention from the investing community. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at OPAP’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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into OPAP here.
Check out our latest analysis for Greek Organization of Football Prognostics
How much cash does OPAP generate through its operations?
OPAP has built up its total debt levels in the last twelve months, from €559.3m to €729.3m , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at €290.4m for investing into the business. Moreover, OPAP has produced cash from operations of €202.8m during the same period of time, leading to an operating cash to total debt ratio of 27.8%, meaning that OPAP’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 OPAP’s case, it is able to generate 0.28x cash from its debt capital.
Does OPAP’s liquid assets cover its short-term commitments?
At the current liabilities level of €300.7m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.49x. Generally, for Hospitality companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is OPAP’s debt level acceptable?
OPAP is a relatively highly levered company with a debt-to-equity of 91.4%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if OPAP’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 OPAP, the ratio of 15.31x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving OPAP ample headroom to grow its debt facilities.
Next Steps:
OPAP’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. Since there is also no concerns around OPAP’s liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I’m sure OPAP has company-specific issues impacting its capital structure decisions. I suggest you continue to research Greek Organization of Football Prognostics to get a better picture of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for OPAP’s future growth? Take a look at our free research report of analyst consensus for OPAP’s outlook.
Valuation: What is OPAP 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 OPAP 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
