Stocks with market capitalization between $2B and $10B, such as ERAMET SA. (ENXTPA:ERA) with a size of €2.96B, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Today we will look at ERA’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into ERA here. View our latest analysis for ERAMET

Does ERA generate enough cash through operations?

ERA’s debt level has been constant at around €2.29B over the previous year made up of current and long term debt. At this stable level of debt, ERA currently has €2.05B remaining in cash and short-term investments , ready to deploy into the business. Moreover, ERA has produced €687.00M in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 30.04%, signalling that ERA’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In ERA’s case, it is able to generate 0.3x cash from its debt capital.

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

Looking at ERA’s most recent €1.63B liabilities, the company has been able to meet these obligations given the level of current assets of €3.50B, with a current ratio of 2.15x. For Metals and Mining companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.

Is ERA’s debt level acceptable?

Since total debt levels have outpaced equities, ERA is a highly leveraged company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In ERA’s case, the ratio of 8.09x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.