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How Financially Strong Is Tassal Group Limited (ASX:TGR)?

Tassal Group Limited (ASX:TGR) is a small-cap stock with a market capitalization of AU$764m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Evaluating financial health as part of your investment thesis is vital, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, I know these factors are very high-level, so I suggest you dig deeper yourself into TGR here.

How does TGR’s operating cash flow stack up against its debt?

Over the past year, TGR has ramped up its debt from AU$98m to AU$134m , which includes long-term debt. With this increase in debt, TGR currently has AU$24m remaining in cash and short-term investments for investing into the business. Additionally, TGR has generated cash from operations of AU$44m in the last twelve months, resulting in an operating cash to total debt ratio of 33%, meaning that TGR’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 TGR’s case, it is able to generate 0.33x cash from its debt capital.

Can TGR meet its short-term obligations with the cash in hand?

At the current liabilities level of AU$136m, it seems that the business has been able to meet these commitments with a current assets level of AU$479m, leading to a 3.53x current account ratio. Having said that, a ratio greater than 3x may be considered by some to be quite high, however this is not necessarily a negative for the company.

ASX:TGR Historical Debt December 13th 18

Can TGR service its debt comfortably?

With a debt-to-equity ratio of 23%, TGR’s debt level may be seen as prudent. TGR is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether TGR 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 TGR’s, case, the ratio of 11.44x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as TGR’s high interest coverage is seen as responsible and safe practice.

Next Steps:

TGR’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure TGR has company-specific issues impacting its capital structure decisions. I recommend you continue to research Tassal Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for TGR’s future growth? Take a look at our free research report of analyst consensus for TGR’s outlook.
  2. Valuation: What is TGR 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 TGR is currently mispriced by the market.
  3. 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 past 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. For errors that warrant correction please contact the editor at