Does Elos Medtech AB (publ.) (STO: ELOS B) generate enough cash?

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<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you are currently a shareholder of Elos Medtech AB (publ) (STO: ELOS B), or if you plan to invest in stocks, you need to consider how the business generates cash and how it is reinvested. After investment, only what belongs to you, the investor, remains. This also determines the value of the stock. I will explain the cash flow health of ELOS B and the risk return concept based on the cash flow performance of the stock, using the most recent financial data. This will help you to consider the company from the point of view of liquidity, which is a crucial factor for investing. "Data-reactid =" 27 "> If you are currently a shareholder of Elos Medtech AB (publ) (STO: ELOS B), or if you plan to invest in shares, you must consider how the 39, business generates cash and how it is reinvested.After investment, you still have what belongs to you, the investor, which also determines the value of the action.guide you through the health of the flows Elos B cash and risk-return concept based on the cash flow performance of the action, using the most recent financial data, which will help you to consider the company from the point of view liquidity, a crucial factor for investment.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " See our latest analysis for Elos Medtech "data-reactid =" 28 "> See our latest analysis for Elos Medtech

What is free cash flow?

The free cash flow (FCF) of Elos Medtech is the level of cash that the activity generates from its operational activities, after reinvestment in the company by capital expenditures. Elos Medtech needs this type of expense to continue to grow or, at least, maintain its current operations.

To determine if the Elos Medtech FCF is sufficient, you must compare the performance of the FCF to the performance of the market index and determine whether operating cash flow from operations will continue to grow.

Free cash flow = cash flow from operations – net capital expenditures

Return on free cash flow = free cash flow / enterprise value

where business value = market capitalization + net debt

Elos Medtech's 1.35% return indicates that its ability to generate cash is below the norm relative to the stock market index as a whole, which explains the size differential. This means that investors take a risk more focused on Elos Medtech but are not rewarded enough to do so.

OM: Net balance sheet value ELOS B, March 10, 2019

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What are the prospects for Elos Medtech?

Can ELOS B improve its operating cash flow in the future? Let's take a quick look at the cash flow trend that the company should generate over time. Over the next two years, the company is expected to increase operating cash flow to a double-digit growth rate of 68%, from its current level of $ 66 million to $ 111 million in three years. While this looks impressive and there is a year-on-year decline in the growth rate, ELOS B's operating cash flow growth is expected to increase from 33% next year to 17%. % at the end of the third year. However, the outlook looks optimistic if ELOS B can also maintain its capital expenditure.

Next steps:

Given the low return on free cash flow, Elos Medtech is becoming a less attractive investment. In fact, you would be better compensated in terms of cash return by investing in the market index and assuming a lower risk of diversification. However, cash is only one aspect of investing. Now that you know how to keep your cash flow in mind, I suggest you continue to search Elos Medtech to get a better picture of the company by consulting:

  1. Evaluation: What is ELOS B worth today? Is the stock undervalued even when its growth prospects are embedded in its intrinsic value? The infographic intrinsic value of our free research report allows to visualize whether ELOS B is currently misjudged by the market.
  2. Management team: An experienced management team increases our confidence in the company – take a look at who sits on the board of Elos Medtech and the bottom of the CEO.
  3. Other performing stocksIf you think you should protect your wallet with something less risky, check out our free list of these great titles here.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Our goal is to provide you with a long-term research analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive business announcements or qualitative information.

If you notice an error that can be corrected, please contact the publisher at editorial-team@simplywallst.com. 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.

"data-reactid =" 56 "> Our goal is to provide you with a long-term research analysis based on fundamental data, please note that our analysis may not take into account the latest announcements of price sensitive companies or qualitative material.

If you notice an error that needs to be corrected, please contact the publisher at editorial-team@simplywallst.com. 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.