Yahoo Finance What You Must Know About LendLease Group’s (ASX:LLC) Financial Health
Mid-caps stocks, like LendLease Group (ASX:LLC) with a market capitalization of AU$11.51b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine LLC’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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into LLC here.
View our latest analysis for LendLease Group
How does LLC’s operating cash flow stack up against its debt?
LLC has sustained its debt level by about AU$1.79b over the last 12 months comprising of short- and long-term debt. At this constant level of debt, the current cash and short-term investment levels stands at AU$1.55b for investing into the business. On top of this, LLC has produced cash from operations of AU$556.80m during the same period of time, leading to an operating cash to total debt ratio of 31.06%, signalling that LLC’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 LLC’s case, it is able to generate 0.31x cash from its debt capital.
Can LLC meet its short-term obligations with the cash in hand?
With current liabilities at AU$5.41b, the company has been able to meet these obligations given the level of current assets of AU$5.49b, with a current ratio of 1.02x. Usually, for Real Estate companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does LLC face the risk of succumbing to its debt-load?
With debt at 27.88% of equity, LLC may be thought of as appropriately levered. LLC is not taking on too much debt commitment, which may be constraining for future growth. We can test if LLC’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 LLC, the ratio of 8.54x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as LLC’s high interest coverage is seen as responsible and safe practice.
Next Steps:
LLC’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. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for LLC’s financial health. Other important fundamentals need to be considered alongside. You should continue to research LendLease Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for LLC’s future growth? Take a look at our free research report of analyst consensus for LLC’s outlook.
Valuation: What is LLC 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 LLC 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 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 editorial-team@simplywallst.com.
