Yahoo Finance Is Cleanaway Waste Management Limited’s (ASX:CWY) Liquidity Good Enough?
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Cleanaway Waste Management Limited (ASX:CWY), with a market cap of AU$3.43B, often get neglected by retail investors. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Today we will look at CWY’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into CWY here. Check out our latest analysis for Cleanaway Waste Management
Does CWY generate enough cash through operations?
CWY has sustained its debt level by about AU$370.20M over the last 12 months – this includes both the current and long-term debt. At this constant level of debt, the current cash and short-term investment levels stands at AU$43.20M , ready to deploy into the business. On top of this, CWY has produced AU$189.60M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 51.22%, meaning that CWY’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CWY’s case, it is able to generate 0.51x cash from its debt capital.
Can CWY pay its short-term liabilities?
At the current liabilities level of AU$380.40M liabilities, it seems that the business has not been able to meet these commitments with a current assets level of AU$334.80M, leading to a 0.88x current account ratio. which is under the appropriate industry ratio of 3x.
Can CWY service its debt comfortably?
CWY’s level of debt is low relative to its total equity, at 1.65%. CWY is not taking on too much debt commitment, which may be constraining for future growth. We can test if CWY’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For CWY, the ratio of 7.51x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving CWY ample headroom to grow its debt facilities.
Next Steps:
CWY’s high cash coverage and conservative debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. But it is still important for shareholders to understand why the company isn’t increasing its cheaper cost of capital to fund future growth, especially if meeting short-term obligations could also bring about issues. Keep in mind I haven’t considered other factors such as how CWY has been performing in the past. I recommend you continue to research Cleanaway Waste Management to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CWY’s future growth? Take a look at our free research report of analyst consensus for CWY’s outlook.
Valuation: What is CWY worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CWY is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
