While small-cap stocks,is tostitos chips gluten free such as N. Leventeris S.A. (

ATH:LEBEK

) with its market cap of €1.7m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since LEBEK is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, this commentary is still very high-level, so I recommend you

dig deeper yourself into LEBEK here

.

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

Over the past year, LEBEK has ramped up its debt from €2.3m to €2.5m , which accounts for long term debt. With this growth in debt, LEBEK currently has €17k remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can examine some of LEBEK’s

operating efficiency ratios such as ROA here

.

Can LEBEK pay its short-term liabilities?

Looking at LEBEK’s €1.7m in current liabilities, it seems that the business has been able to meet these obligations given the level of current assets of €1.8m, with a current ratio of 1.01x. Generally, for Metals and Mining companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

ATSE:LEBEK Historical Debt January 2nd 19

Does LEBEK face the risk of succumbing to its debt-load?

With debt at 39% of equity, LEBEK may be thought of as appropriately levered. This range is considered safe as LEBEK is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with LEBEK, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

LEBEK’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how LEBEK has been performing in the past. I suggest you continue to research N. Leventeris to get a better picture of the stock by looking at:

Valuation

: What is LEBEK 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 LEBEK is currently mispriced by the market.

Historical Performance

: What has LEBEK’s returns been like over the past? Go into more detail in the past track record analysis and take a look at

the free visual representations of our analysis

for more clarity.

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

[email protected]

.

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