EL D. Mouzakis S.A. (ATSE:MOYZK) is a small-cap stock with a market capitalization of €12.10M. 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, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. However, I know these factors are very high-level, so I recommend you dig deeper yourself into MOYZK here.

Does MOYZK generate enough cash through operations?

MOYZK has shrunken its total debt levels in the last twelve months, from €17.33M to €11.10M , which comprises of short- and long-term debt. With this debt payback, MOYZK currently has €129.88K remaining in cash and short-term investments , ready to deploy into the business. Moreover, MOYZK has generated €6.03M in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 54.35%, meaning that MOYZK’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In MOYZK’s case, it is able to generate 0.54x cash from its debt capital.

Does MOYZK’s liquid assets cover its short-term commitments?

With current liabilities at €1.93M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.12x. Though, a ratio greater than 3x may be considered as too high, as MOYZK could be holding too much capital in a low-return investment environment.

Is MOYZK’s debt level acceptable?

With debt reaching 63.43% of equity, MOYZK may be thought of as relatively highly levered. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses.

Next Steps:

Although MOYZK’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around MOYZK’s liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I’m sure MOYZK has company-specific issues impacting its capital structure decisions. I recommend you continue to research EL. D. Mouzakis to get a more holistic view of the small-cap by looking at: