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Mid-caps stocks, like Greek Organization of Football Prognostics SA. (ATSE:OPAP) with a market capitalization of €2.99B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. OPAP’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into OPAP here. Check out our latest analysis for Greek Organization of Football Prognostics
Does OPAP generate enough cash through operations?
OPAP has built up its total debt levels in the last twelve months, from €381.69M to €682.27M – this includes both the current and long-term debt. With this growth in debt, OPAP currently has €246.10M remaining in cash and short-term investments , ready to deploy into the business. Additionally, OPAP has produced cash from operations of €244.93M in the last twelve months, leading to an operating cash to total debt ratio of 35.90%, signalling that OPAP’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In OPAP’s case, it is able to generate 0.36x cash from its debt capital.
Can OPAP meet its short-term obligations with the cash in hand?
With current liabilities at €482.02M, it seems that the business has not been able to meet these commitments with a current assets level of €440.38M, leading to a 0.91x current account ratio. which is under the appropriate industry ratio of 3x.
Can OPAP service its debt comfortably?
OPAP is a relatively highly levered company with a debt-to-equity of 89.99%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if OPAP’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 OPAP, the ratio of 16.99x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as OPAP’s high interest coverage is seen as responsible and safe practice.
Next Steps:
OPAP’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its lack of liquidity raises questions over current asset management practices for the mid-cap. I admit this is a fairly basic analysis for OPAP’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Greek Organization of Football Prognostics to get a better picture of the stock by looking at: