AUS
NZ
UK
CA
USA
IND
Highlights
- Stealth Group Holdings shows strong free cash flow compared to earnings
- Recent debt increase manageable relative to its market cap
- Interest coverage ratio remains an area to monitor
Stealth Group Holdings (ASX:SGI) has seen a notable uptick in its debt profile over the past year, but a closer examination suggests the company is handling its financial obligations with reasonable prudence.
As of December 2024, Stealth Group’s total debt rose to AU$21.4 million, up from AU$14.5 million a year earlier. While this marks a significant increase, it's not necessarily a red flag when viewed in context. The company still maintains a market capitalization of AU$87.8 million, offering it a buffer to manage or raise capital if required.
Looking at the balance sheet, Stealth Group had short-term liabilities of AU$52.1 million and long-term liabilities of AU$11.9 million. These are offset in part by AU$10.4 million in cash and AU$17.6 million in receivables due within the year. This leaves a shortfall of AU$35.9 million, meaning the business does rely on ongoing earnings and operational efficiency to meet its obligations.
One of the standout factors is the company’s cash-generating ability. Over the last three years, Stealth Group has consistently produced more free cash flow than accounting profits—an encouraging sign for financial health. Strong cash conversion like this is particularly valuable in times of higher interest rates or economic uncertainty.
Another measure, net debt to EBITDA, comes in at 1.8x, which is within a reasonable range and indicates that debt levels are not overstretching earnings. The interest coverage ratio, however, shows some room for improvement, with EBIT covering interest expenses 2.8 times. While not alarming, it does suggest that interest payments are noticeable on the income statement.
Perhaps most promising is the company’s recent earnings momentum. Stealth Group’s EBIT surged by 64% over the past year, an impressive growth rate that improves its ability to manage existing liabilities and potentially fund future expansion.
There are aspects of the balance sheet that warrant ongoing monitoring—particularly around interest coverage—Stealth Group Holdings (SGI) appears to be managing its debt in a relatively measured way. The combination of rising earnings and robust free cash flow suggests the business is not overexposed to financial risk, positioning it for potentially stronger performance ahead.
