Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Strabag SE (WBAG:STR), with a market cap of €3.34B, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine STR’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 Amazon’s financial health, so you should conduct further analysis into STR here. Check out our latest analysis for Strabag
Does STR generate enough cash through operations?
STR has shrunken its total debt levels in the last twelve months, from €1.58B to €1.43B , which comprises of short- and long-term debt. With this reduction in debt, STR’s cash and short-term investments stands at €2.15B , ready to deploy into the business. Moreover, STR has produced cash from operations of €264.17M in the last twelve months, resulting in an operating cash to total debt ratio of 18.52%, meaning that STR’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In STR’s case, it is able to generate 0.19x cash from its debt capital.
Can STR pay its short-term liabilities?
With current liabilities at €4.69B, the company has been able to meet these obligations given the level of current assets of €6.25B, with a current ratio of 1.33x. Usually, for Construction companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is STR’s debt level acceptable?
STR is a relatively highly levered company with a debt-to-equity of 40.64%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
STR’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, 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 STR has been performing in the past. I suggest you continue to research Strabag to get a better picture of the stock by looking at: