Yahoo Finance What You Must Know About Bechtle AG’s (ETR:BC8) Financial Health
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Bechtle AG (ETR:BC8) with a market-capitalization of €3.3b, rarely draw their attention. 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. Let’s take a look at BC8’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into BC8 here.
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Does BC8 produce enough cash relative to debt?
BC8 has built up its total debt levels in the last twelve months, from €73m to €132m , 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 €104m for investing into the business. Moreover, BC8 has produced €85m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 64%, meaning that BC8’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BC8’s case, it is able to generate 0.64x cash from its debt capital.
Can BC8 meet its short-term obligations with the cash in hand?
With current liabilities at €467m, the company has been able to meet these commitments with a current assets level of €961m, leading to a 2.06x current account ratio. Generally, for IT companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Does BC8 face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 17%, BC8’s debt level may be seen as prudent. BC8 is not taking on too much debt commitment, which may be constraining for future growth. We can test if BC8’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 BC8, the ratio of 118x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving BC8 ample headroom to grow its debt facilities.
Next Steps:
BC8’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how BC8 has been performing in the past. You should continue to research Bechtle to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BC8’s future growth? Take a look at our free research report of analyst consensus for BC8’s outlook.
Valuation: What is BC8 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 BC8 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.