Yahoo Finance Is TKH Group NV (AMS:TWEKA) A Financially Sound Company?
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as TKH Group NV (AMS:TWEKA), with a market capitalization of €1.8b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine TWEKA’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. Don’t forget that this is a general and concentrated examination of TKH Group’s financial health, so you should conduct further analysis into TWEKA here.
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How does TWEKA’s operating cash flow stack up against its debt?
TWEKA’s debt levels surged from €314m to €355m over the last 12 months , which is made up of current and long term debt. With this growth in debt, TWEKA’s cash and short-term investments stands at €99m , ready to deploy into the business. On top of this, TWEKA has produced cash from operations of €118m during the same period of time, resulting in an operating cash to total debt ratio of 33%, signalling that TWEKA’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In TWEKA’s case, it is able to generate 0.33x cash from its debt capital.
Can TWEKA pay its short-term liabilities?
Looking at TWEKA’s most recent €443m liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.63x. Generally, for Electrical companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can TWEKA service its debt comfortably?
With a debt-to-equity ratio of 60%, TWEKA can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether TWEKA is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In TWEKA’s, case, the ratio of 20.55x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving TWEKA ample headroom to grow its debt facilities.
Next Steps:
Although TWEKA’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Keep in mind I haven’t considered other factors such as how TWEKA has been performing in the past. You should continue to research TKH Group to get a better picture of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for TWEKA’s future growth? Take a look at our free research report of analyst consensus for TWEKA’s outlook.
Valuation: What is TWEKA 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 TWEKA 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.
