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Stocks with market capitalization between $2B and $10B, such as Flutter Entertainment PLC (ISE:FLTR) with a size of €5.1b, do not attract as much attention from the investing community as do the small-caps and large-caps. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine FLTR’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 Flutter Entertainment's financial health, so you should conduct further analysis into FLTR here.
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Does FLTR Produce Much Cash Relative To Its Debt?
FLTR's debt levels surged from UK£62m to UK£283m over the last 12 months – this includes long-term debt. With this increase in debt, FLTR currently has UK£124m remaining in cash and short-term investments to keep the business going. Additionally, FLTR has produced UK£330m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 117%, meaning that FLTR’s current level of operating cash is high enough to cover debt.
Can FLTR meet its short-term obligations with the cash in hand?
Looking at FLTR’s UK£578m in current liabilities, it seems that the business may not be able to easily meet these obligations given the level of current assets of UK£373m, with a current ratio of 0.64x. The current ratio is calculated by dividing current assets by current liabilities.
Does FLTR face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 6.7%, FLTR's debt level is relatively low. This range is considered safe as FLTR is not taking on too much debt obligation, which may be constraining for future growth. We can check to see whether FLTR 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 FLTR's, case, the ratio of 130x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving FLTR ample headroom to grow its debt facilities.