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 (LSE:GVC) with a market-capitalization of UK£5.93B, rarely draw their attention. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. GVC’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into GVC here. Check out our latest analysis for GVC Holdings
Does GVC generate an acceptable amount of cash through operations?
GVC has shrunken its total debt levels in the last twelve months, from €403.50M to €295.40M , which is made up of current and long term debt. With this debt payback, the current cash and short-term investment levels stands at €303.80M , ready to deploy into the business. Moreover, GVC has generated cash from operations of €160.00M during the same period of time, leading to an operating cash to total debt ratio of 54.16%, meaning that GVC’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable companies as traditional 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.
Does GVC’s liquid assets cover its short-term commitments?
At the current liabilities level of €325.60M liabilities, the company has been able to meet these commitments with a current assets level of €426.20M, leading to a 1.31x current account ratio. Generally, for Hospitality companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Is GVC’s debt level acceptable?
GVC’s level of debt is appropriate relative to its total equity, at 23.10%. GVC is not taking on too much debt commitment, which may be constraining for future growth. 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’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. 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.
