Is Balfour Beatty plc (LON: BBY) financially sound? – Simply Wall St News

Small and large caps are extremely popular among investors; However, mid-cap stocks, such as Balfour Beatty plc (LON: BBY), with a market capitalization of £ 1.8 billion, rarely attract attention.
Despite this, often neglected mid-cap companies have consistently produced better risk-adjusted returns than their smaller and larger cap counterparts.
Today, we will review BBY's liquidity and debt levels, which are strong indicators of the company's ability to weather economic crises or fund strategic acquisitions for future growth.
Note that this information is entirely focused on financial health and is a high level understanding. I encourage you to look further.
in BBY here.

See our latest badysis for Balfour Beatty

Does BBY produce a lot of cash in relation to its debt?

BBY's debt has risen from £ 1.1 billion to £ 764 million in the last 12 months
, which also represents a long-term debt.
With that
debt repayment,
BBY's cash and short-term investments amount to £ 661 million
, ready to be used to run the business.
Its negative operating cash flow means that the calculation of the debt ratio would not be useful.
In the interest of this article,
I will not look at this today, but you can
badess
some of BBY
operating efficiency ratios such as ROA here.

Can BBY meet its short-term obligations with its cash on hand?

Looking at the £ 2.1bn BBY short-term liabilities,
it seems that the company
It may be difficult to meet these commitments with badets of £ 2.0 billion, giving a current ratio of 0.96.
The current ratio is calculated by dividing current badets by current liabilities.

Can BBY repay its debt comfortably?

BBY is a relatively indebted company with a debt ratio of 62%.
This is not uncommon for a mid-cap business, as debt tends to be cheaper and sometimes more accessible.
We can verify whether BBY is able to meet its debt by examining the net interest coverage ratio. A company that generates a profit before interest and taxes (EBIT) of at least three times its net interest payments is considered financially sound. In the case of BBY, the ratio
3.29x suggests that interests are properly covered, which means that
Lenders may be less reluctant to lend more because BBY's high interest coverage is considered a responsible and safe practice.

Next steps:

BBY's strong cash flow means that, even with high levels of debt, the company is able to use its borrowings effectively to generate cash flow.
But,
its low liquidity raises concerns about the proper implementation of current badet management practices for mid-cap companies.
This is only a rough estimate of financial health, and I am sure that BBY has company-specific issues that affect its capital structure decisions.
I recommend you
continue to search for Balfour Beatty to get a
more holistic view
from stock watching:

1. Future prospects: What do well-informed industry badysts predict for BBY's future growth? Check out our free research report on badyst consensus regarding BBY's outlook.
2. Evaluation: What is BBY worth today? Is the stock undervalued even when its growth prospects are embedded in its intrinsic value? The intrinsic value infographic of our free research report helps to visualize whether BBY is currently misjudged by the market.
3. Other performing stocks: Are there other stocks offering better prospects with proven track records? Explore our free list of these large stocks here.

Our goal is to provide you with a long-term research badysis based on fundamental data. Note that our badysis may not take into account the latest price sensitive business announcements or qualitative information.

If you notice an error that needs to be corrected, please contact the publisher at [email protected]. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.