Haydale Graphene Industries, PLC has been making headlines nonstop this week, boasting staggeringly high profit margins, but at a steep cost.
Haydale has proven it can deliver high growth and successfully maintain its profits, but the question remains of whether or not they have the cashflow to weather a financial storm, particularly in regards to their recent acquisition of two major companies.
According to an article on SimplyWall.st, “Due to the lack of diversification in revenues geographically, often investors opt for a bundle of small-caps. While savvy investors aren’t wrong in looking for singular blockbuster opportunities and trying to achieve diversification on their own by allocating a small part of their portfolio capital to small-caps, that doesn’t make these investments less risky individually. However, to help you reduce that risk, I’m going to provide you with few basic aspects other than debt-to-equity ratio to gauge a ballpark estimate on how financially strong is the company.”
While even the most profitable of companies face downturn as the markets change, they tend to survive due their ability to adjust quickly, as well as their strong liquidity positions. For example, Haydale’s current assets of £4 million easily covers the company’s total debt of £2 million.
Per SimplyWall.St, “Clearly, Haydale Graphene Industries has a significantly low debt on its balance sheet. The company fails to impress in terms of generating strong enough operating cash flows or earnings. Thus, for now, I don’t find it a financially sound company. Now when you know whether you should keep the debt in mind as a risk factor when putting together your investment thesis, I recommend you check out our latest free analysis report on Haydale Graphene Industries to see what are HAYD’s growth prospects and whether it could be considered an undervalued opportunity.”