Yahoo Finance TP Group plc (LON:TPG): Time For A Financial Health Check
Investors are always looking for growth in small-cap stocks like TP Group plc (LON:TPG), with a market cap of UK£48m. However, an important fact which most ignore is: how financially healthy is the business? Since TPG is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into TPG here.
How does TPG’s operating cash flow stack up against its debt?
Over the past year, TPG has borrowed debt capital of around UK£5.6m . With this increase in debt, TPG currently has UK£21m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of TPG’s operating efficiency ratios such as ROA here.
Does TPG’s liquid assets cover its short-term commitments?
With current liabilities at UK£17m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.21x. Usually, for Machinery companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can TPG service its debt comfortably?
TPG’s level of debt is appropriate relative to its total equity, at 16%. This range is considered safe as TPG is not taking on too much debt obligation, which may be constraining for future growth. TPG’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
Next Steps:
TPG’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 will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how TPG has been performing in the past. You should continue to research TP Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TPG’s future growth? Take a look at our free research report of analyst consensus for TPG’s outlook.
Valuation: What is TPG 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 TPG 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.
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