Yahoo Finance Is GVC Holdings PLC’s (LON:GVC) Liquidity Good Enough?
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as GVC Holdings PLC (LON:GVC) with a market-capitalization of UK£5.81b, rarely draw their attention. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine GVC’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into GVC here. View out our latest analysis for GVC Holdings
How much cash does GVC generate through its operations?
GVC has shrunken its total debt levels in the last twelve months, from UK£403.50m to UK£295.40m , which comprises of short- and long-term debt. With this debt payback, GVC’s cash and short-term investments stands at UK£303.80m , ready to deploy into the business. Moreover, GVC has generated cash from operations of UK£160.00m during the same period of time, resulting in an operating cash to total debt ratio of 54.16%, meaning that GVC’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In GVC’s case, it is able to generate 0.54x cash from its debt capital.
Can GVC pay its short-term liabilities?
With current liabilities at UK£325.60m, it seems that the business has been able to meet these obligations given the level of current assets of UK£426.20m, with a current ratio of 1.31x. Usually, for Hospitality companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does GVC face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 23.10%, GVC’s debt level may be seen as prudent. This range is considered safe as GVC is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is very low for GVC, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
GVC has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for GVC’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research GVC Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for GVC’s future growth? Take a look at our free research report of analyst consensus for GVC’s outlook.
Valuation: What is GVC 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 GVC 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.
