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Mid-caps stocks, like Hugo Boss AG (DB:BOSS) with a market capitalization of €5.16B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine BOSS’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 BOSS here. Check out our latest analysis for Hugo Boss
Does BOSS generate enough cash through operations?
BOSS has shrunken its total debt levels in the last twelve months, from €211.19M to €131.79M – this includes both the current and long-term debt. With this reduction in debt, BOSS currently has €154.53M remaining in cash and short-term investments , ready to deploy into the business. Additionally, BOSS has produced €420.06M in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 318.72%, indicating that BOSS’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BOSS’s case, it is able to generate 3.19x cash from its debt capital.
Can BOSS meet its short-term obligations with the cash in hand?
Looking at BOSS’s most recent €606.81M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of €1.06B, with a current ratio of 1.74x. Generally, for Luxury companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can BOSS service its debt comfortably?
BOSS’s level of debt is appropriate relative to its total equity, at 27.65%. BOSS is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether BOSS 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 BOSS’s, case, the ratio of 77.24x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving BOSS ample headroom to grow its debt facilities.