ASX:CAS Historical Debt Nov 7th 17
Unxpected adverse events, such as natural disasters and wars, can be a true test of a company’s capacity to meet its obligations. Furthermore, failure to service debt can hurt its reputation, making funding expensive in the future. Can CAS pay off what it owes to its debtholder by using only cash from its operational activities? In the case of CAS, operating cash flow turned out to be -5.28x its debt level over the past twelve months. This means what CAS 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 CAS’s operations at this point in time.
Does CAS’s liquid assets cover its short-term commitments?
What about its other commitments such as payments to suppliers and salaries to its employees? During times of unfavourable events, CAS could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We test for CAS’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that CAS is unable to meet all of its upcoming commitments with its cash and other short-term assets. While this is not abnormal for companies, as their cash is better invested in the business or returned to investors than lying around, it does bring about some concerns should any unfavourable circumstances arise.
Can CAS service its debt comfortably?
A substantially higher debt poses a significant threat to a company’s profitability during a downturn. For CAS, the debt-to-equity ratio is 9.16%, which means debt is low and does not pose any significant threat to the company’s operations.
Next Steps:
Are you a shareholder? Although CAS’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. In addition to this, the company may not be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may change. You should always be keeping on top of market expectations for CAS’s future growth on our free analysis platform.
Are you a potential investor? CAS seems to have maintained a sensible level of debt, which means there’s still some headroom to grow debt funding. But its current cash flow coverage of existing debt, in addition to the low liquidity, is concerning. However, keep in mind that this is a point-in-time analysis, and today’s performance may not be representative of CAS’s track record. You should continue your analysis by taking a look at CAS’s past performance analysis on our free platform to conclude on CAS’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.