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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as EnBW Energie Baden-Württemberg AG (DB:EBK), with a market capitalization of €7.15B, rarely draw their attention from the investing community. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine EBK’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into EBK here. See our latest analysis for EnBW Energie Baden-Württemberg
Does EBK generate enough cash through operations?
EBK has shrunken its total debt levels in the last twelve months, from €7.93B to €7.26B , which comprises of short- and long-term debt. With this debt repayment, EBK currently has €3.80B remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can take a look at some of EBK’s operating efficiency ratios such as ROA here.
Can EBK pay its short-term liabilities?
Looking at EBK’s most recent €11.00B liabilities, it appears that the company has been able to meet these commitments with a current assets level of €12.02B, leading to a 1.09x current account ratio. For Electric Utilities companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Is EBK’s debt level acceptable?
Since total debt levels have outpaced equities, EBK is a highly leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses.
Next Steps:
EBK’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for EBK’s financial health. Other important fundamentals need to be considered alongside. You should continue to research EnBW Energie Baden-Württemberg to get a more holistic view of the stock by looking at: