The UK-based company, SIG Plc (LON: SHI) distributes specialist building solutions to trade customers. Its products include insulation, interiors, roofing, exteriors, and air handling solutions. The SHI stock has a market capitalization of £383M, configured as a small-cap firm.
Recovery from the COVID-19 Pandemic
The company is seen recovering from the damage done by the COVID-19 pandemic in 2020. The revenue shrunk to £1.8B in 2020, but now it is growing with a Compound annual growth rate of 21.04%. Last year the sales clocked at £2.7B while the net income after taxes was £15M.
Looking at SIG’s recent balance sheet data, we can see that the SIG has liabilities totaling £523M. The liabilities are more than its cash and receivables combined. Meanwhile, the current ratio is 1.59 and it has shown a decrease in the past 4 years, which has to be a concerning factor for its management
While SIG’s net debt to EBITDA ratio of 1.9 is reasonable, its interest coverage ratio of 1.9 seems weak when taking into account the current market situation. It raises concerns that the company may be considered risky and have to pay higher interest rates.
Concerning long-term debt
The debt-to-equity ratio is more than 2.11, which means that the company is holding more than twice the debt as compared with its reserves and share capital combined. Regardless, it’s clear that the company is using significant leverage. SIG’s EBIT increased by 2.9% in the last year.
Technical Analysis and Prediction of SHI Share Price
On Wednesday, the SHI share price made a gap-down opening. It was a confirmation of the short uptrend being broken. At the press time, the shares are trading at the level of £32.4 after the SHI surged up from the support level of £28.15. The 50 exponential moving average price is £34.5, while the 150-day exponential moving average price is £35.
The prediction of the SHI share price will be bullish until the stock reaches its 150-day EMA price level. It has to fill up the liquidity that was created by the gap-down opening. After that, the bulls may attempt to push the price higher, but there is a high likelihood that the SHI bears will fill the liquidity on the downside created by the long shadow cast by Thursday’s candle.
Conclusion
SIG Plc (LON: SHI) distributes specialist building solutions to trade customers. The company has been making good revenues after the COVID-19 pandemic. However, the long-term debt and low cash availability have made the investors raise questions. Consequently, the shares are in a downtrend. The price prediction is bullish till the stock regains a certain level
Technical Levels
Support: £28.1 and £23.1
Resistance: £37, and £43.5
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks comes with a risk of financial loss.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/10/15/shi-share-analysis-sales-are-growing-but-the-debt-is-concerning/