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KONE Oyj (HEL:KNEBV), a large-cap worth €21.1b, comes to mind for investors seeking a strong and reliable stock investment. Most investors favour these big stocks due to their strong balance sheet and high market liquidity, meaning there are an abundance of stock in the public market available for trading. In times of low liquidity in the market, these firms won’t be left high and dry. They are also relatively unaffected by increases in interest rates. Using the most recent data for KNEBV, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
Check out our latest analysis for KONE Oyj
How much cash does KNEBV generate through its operations?
KNEBV’s debt level has been constant at around €229m over the previous year made up of current and long term debt. At this current level of debt, KNEBV currently has €1.6b remaining in cash and short-term investments , ready to deploy into the business. On top of this, KNEBV has generated cash from operations of €898m in the last twelve months, resulting in an operating cash to total debt ratio of 393%, meaning that KNEBV’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 KNEBV’s case, it is able to generate 3.93x cash from its debt capital.
Can KNEBV meet its short-term obligations with the cash in hand?
At the current liabilities level of €4.0b liabilities, the company has been able to meet these commitments with a current assets level of €4.9b, leading to a 1.22x current account ratio. For Machinery companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is KNEBV’s debt level acceptable?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. A ratio below 40% for large-cap stocks is considered as financially healthy, as a rule of thumb. With a debt-to-equity ratio of 8.7%, KNEBV’s debt level is relatively low. This range is considered safe as KNEBV is not taking on too much debt obligation, which may be constraining for future growth.
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KNEBV’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how KNEBV has been performing in the past. I suggest you continue to research KONE Oyj to get a better picture of the stock by looking at: