Yahoo Finance Is Wacker Neuson SE’s (FRA:WAC) Liquidity Good Enough?
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Wacker Neuson SE (FRA:WAC), with a market capitalization of €1.72b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at WAC’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into WAC here.
View our latest analysis for Wacker Neuson
Does WAC produce enough cash relative to debt?
WAC’s debt levels have fallen from €270.8m to €246.8m over the last 12 months , which is made up of current and long term debt. With this debt payback, the current cash and short-term investment levels stands at €65.9m , ready to deploy into the business. On top of this, WAC has generated €88.5m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 35.9%, indicating that WAC’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 WAC’s case, it is able to generate 0.36x cash from its debt capital.
Does WAC’s liquid assets cover its short-term commitments?
Looking at WAC’s most recent €329.0m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of €1.02b, with a current ratio of 3.11x. Though, anything above 3x is considered high and could mean that WAC has too much idle capital in low-earning investments.
Does WAC face the risk of succumbing to its debt-load?
WAC’s level of debt is appropriate relative to its total equity, at 21.1%. WAC is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether WAC 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 WAC’s, case, the ratio of 28.73x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as WAC’s high interest coverage is seen as responsible and safe practice.
Next Steps:
WAC 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 will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure WAC has company-specific issues impacting its capital structure decisions. I recommend you continue to research Wacker Neuson to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for WAC’s future growth? Take a look at our free research report of analyst consensus for WAC’s outlook.
Valuation: What is WAC 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 WAC 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.
