Is bpost SA / NVs (EBR: BPOST) Balance Sheet Strong Enough To Weather A Storm?
Small and large cap stocks are widely popular for a variety of reasons, however, mid cap companies such as bpost tracking SA / NV (EBR: BPOST), with a market cap or € 2.1b, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns generally have better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine BPOST'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. Remember this is a very top-level look that exclusively on financial health, so I recommend a deeper analysis.
BPOST's Debt (And Cash Flows)
BPOST has built up its total debt levels in the last twelve months, from € 755m to € 1.0b, which includes long-term debt. With this increase in debt, BPOST currently has € 680m remaining in cash and short-term investments, ready to be used for running the business. Additionally, Bpost tracking international has produced cash from operations or € 362m during the same period of time, leading to an operating cash to total debt ratio of 35%, signaling that BPOST's operating cash is sufficient to cover its debt.
Can BPOST meet its short-term obligations with cash in hand?
At the current liabilities level or € 1.4b, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.01x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Logistics companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is BPOST's debt level acceptable?
With total debt exceeding equity, BPOST is considered a highly levered company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether BPOST 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 BPOSTs, case, the ratio of 31.81x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Next Steps:
BPOST's high cash coverage means that, although its debt levels are high, the company is able to utilize its borrowings efficiently in order to generate cash flow. Since there is also no concern around BPOST's liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I'm sure BPOST has company-specific issues impacting its capital structure decisions. I recommend you continue to research bpost to get a more holistic view of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for BPOST's future growth? Take a look at our free research report or analyst consensus for BPOST's outlook.
Valuation: What is BPOST 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 BPOST 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 or these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not be a factor in the latest price-sensitive company announcements or qualitative material.
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