Very positive piece in Simply Wall Street...

Very positive piece in Simply Wall Street
https://simplywall.st/news/2017/03/...rms-group-asxahf-financial-strength-analysis/
Australian Dairy Farms Group (ASX:AHF): Financial Strength Analysis

Brad Riley March 6, 2017
Small-cap companies such as Australian Dairy Farms Group (ASX:AHF) with its market cap of USD $23 Million, have high growth potential but financial strength is the deciding factor in their long-term survival. On the surface, companies with a debt-to-equity ratio of less than 20% appear to have a sound debt structure, as is the case with AHF. But it is important you also look at other financial strength metrics to have the complete picture, like are they resilient enough to face an economic or industry downturn?
Primarily 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.Check out our latest analysis for Australian Dairy Farms Group
Does Australian Dairy Farms Group’s liquidity position also indicate financial strength?

To test Australian Dairy Farms Group’s financial condition further, I would weigh its current assets against the total debt. The level of current assets indicates AHF’s ability to survive a downturn, which most companies face several times in their life cycle. AHF’s current assets to total debt ratio of 45.5% falls short of what I expect from a financially sound company. AHF can face difficult financial challenges during adverse operating environment


Australian Dairy Farms Group (ASX:AHF) Historical Debt Mar 6th 17

Does AHF net enough to cover its debt-costs?

While operating cash flows are vital, earnings tell how profitable is the company, after also accounting for its gains and losses in non-core ventures and non-cash expenses such as depreciation and amortization. When a company earns enough to service its debt comfortably, this reflects its profitability and financial strength. If a company’s earnings are greater than 5x its interest expense, it indicates sound financial strength as the company earns way more than its debt obligations. In AHF’s case, the company is making a loss, therefore interest on debt is not well covered by earnings.


Australian Dairy Farms Group (ASX:AHF) Net Worth Mar 6th 17

Conclusion