Investors are always looking for growth in small-cap stocks like TAS Tecnologia Avanzata dei Sistemi SpA (BIT:TAS), with a market cap of €150.37m. However, an important fact which most ignore is: how financially healthy is the business?
in particular ones that run negative earnings,
tend to be high risk.
So, understanding the company’s financial health becomes
Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength.
given that I have not delve into the company-specifics,
I recommend you
dig deeper yourself into TAS here.
Does TAS produce enough cash relative to debt?
Over the past year, TAS has ramped up its debt from €5.94m to €6.39m
, which comprises of short- and long-term debt.
the current cash and short-term investment levels stands at €5.53m
for investing into the business.
€3.58m in operating cash flow
over the same time period,
an operating cash to total debt ratio of 56.10%,
current level of operating cash is high enough to cover debt.
This ratio can also be a sign of operational efficiency
as traditional metrics
such as return on asset (ROA) requires
In TAS’s case, it is able to generate 0.56x cash from its debt capital.
Can TAS meet its short-term obligations with the cash in hand?
At the current liabilities level of €22.48m liabilities,
has been able to meet these commitments with a current assets level of €30.12m, leading to a 1.34x current account ratio.
Generally, for Software companies, this is a reasonable ratio
since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can TAS service its debt comfortably?
With a debt-to-equity ratio of 27.02%, TAS’s debt level may be seen as prudent.
This range is considered safe as TAS is not taking on too much debt obligation,
which may be constraining for future growth.
TAS’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.
TAS’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow.
In addition to this,
the company exhibits proper management of current assets and upcoming liabilities.
I admit this is a fairly basic analysis for TAS’s financial health. Other important fundamentals need to be considered alongside.
continue to research TAS Tecnologia Avanzata dei Sistemi to get a
more holistic view
of the stock by looking at:
- Historical Performance: What has TAS’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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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