Sterling & Wilson Renewable Energy Ltd

Growth Ratio Summary

Growth Score : 2.40

The company is in a state of aggressive, but currently unprofitable, growth. On the one hand, it is achieving outstanding growth in its revenues and expanding its asset base, which indicates successful market capture and investment in future capacity. On the other hand, this expansion is leading to significant declines in profits and earnings. This classic 'growth-at-all-costs' strategy is common in emerging industries. The positive is the rapid expansion; the major negative is that this growth is not yet translating into financial returns for the company or its shareholders.

Financial Ratio Summary

Financial Score : 1.50

The company's financial performance from a shareholder's point of view is weak. Key metrics like earnings per share are negative, meaning the company is currently losing money for each share outstanding. This directly translates to poor returns for investors. The book value per share, an indicator of net asset value, is also low. The company is not paying dividends. The only neutral aspect is a moderate level of capital expenditure, suggesting some investment for the future. Overall, the current financial returns and value for shareholders are poor.

Profitability Ratio Summary

Profitability Score : 2.00

The company's profitability profile is largely weak, with a single notable exception. It suffers from negative margins at the gross, operating, and net levels, meaning it is losing money on its sales from top to bottom. Returns on assets and equity are also poor. In stark contrast, the return on capital employed (ROCE) is excellent. This creates a conflicting picture: while the company is currently unprofitable in its day-to-day business, the high ROCE suggests that the capital it has invested in its projects has the potential to be highly effective and profitable in the long run.

Efficiency Ratio Summary

Efficiency Score : 3.50

The company's operational efficiency presents a mixed picture. It shows excellent performance in generating sales from its fixed assets and managing its inventory, indicating strong production and sales processes. However, this is contrasted by significant weaknesses in its credit and collections cycle. The company takes a long time to collect payments from its customers, which ties up cash and strains working capital. While it is highly effective at using its core assets, the inefficiency in converting credit sales to cash is a notable drawback.

Coverage Ratio Summary

Coverage Score : 1.00

The company's ability to cover its financial obligations, particularly interest on its debt, is poor. Its current earnings are not sufficient to meet its interest payments, indicating a significant level of financial stress. This situation means the company must rely on cash reserves or additional financing to service its debt, which is not sustainable. The company also does not pay dividends, reflecting the lack of distributable profits. This overall weakness in coverage highlights a key risk in its financial profile.

Solvency Ratio Summary

Solvency Score : 4.50

The company exhibits a very strong and healthy solvency position. Its financial structure is built on a solid foundation of equity rather than debt. This low reliance on borrowed funds significantly minimizes financial risk and provides a substantial cushion against economic uncertainties. The company's assets are predominantly financed by shareholders' capital, indicating long-term stability and a high degree of financial independence. This conservative approach to leverage is a key strength, ensuring the company's sustainability and long-term viability.

Liquidity Ratio Summary

Liquidity Score : 2.48

The company's liquidity position shows a mixed profile. On the positive side, it has a good ability to cover its immediate liabilities with its most liquid assets, even without selling inventory. This suggests a healthy composition of current assets. However, a key concern is that the company's core operations are currently consuming more cash than they generate. This negative operating cash flow means it depends on financing activities or existing cash reserves to meet its short-term obligations. Overall, while the asset coverage is adequate, the cash generation from the business itself is a significant area of weakness.