ASX:MEP Historical Debt Nov 14th 17
There are many headwinds that come unannounced, such as natural disasters and political turmoil, which can challenge a small business and its ability to adapt and recover. These adverse events bring devastation and yet does not absolve the company from its debt. We can test the impact of these adverse events by looking at whether cash from its current operations can pay back its current debt obligations. In the case of MEP, operating cash flow turned out to be -1.11x its debt level over the past twelve months. This means what MEP can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at MEP’s operations at this point in time.
Can MEP pay its short-term liabilities?
What about its commitments to other stakeholders such as payments to suppliers and employees? In times of adverse events, MEP may need to liquidate its short-term assets to pay these immediate obligations. We test for MEP’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that MEP is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.
Does MEP face the risk of succumbing to its debt-load?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. MEP’s debt-to-equity ratio stands at 3.64%, which means debt is low and does not pose any significant threat to the company’s operations.
Next Steps:
Are you a shareholder? MEP’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Given that its financial position may be different. You should always be keeping on top of market expectations for MEP’s future growth on our free analysis platform.
Are you a potential investor? MEP’s low-debt position gives it headroom for future growth funding in the future. Furthermore, its high liquidity ensures the company will continue to operate smoothly should unfavourable circumstances arise. In order to build your conviction in the stock, you need to also analyse the company’s track record. I encourage you to continue your research by taking a look at MEP’s past performance analysis on our free platform to conclude on MEP’s financial health.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.