Between 2013 and 2017 Metrofile’s share traded in a broad range, between 400c and 550c, before it fell sharply in early 2018. At the time of writing the share was at about 150c. There has been a concomitant fall in the rating, and the earnings multiple now stands at six times rolling 12-month headline earnings, compared with 18 times at the peak five years ago. The question for investors is whether the fall in the share price provides a buying opportunity. A few key ratios need to be considered. What is strikingly obvious is the substantial increase in the debt-to-equity ratio in 2017-2018. Net debt rose from R185m to marginally above R600m, and the deterioration in return on assets managed dropped to 14% (it was 22% at end financial 2017) on both a fall in the operating margin and asset turn. The annual report and subsequent discussions with management have confirmed that the debt incurred was part of a geographic and technological realignment of the company. About R260m was spent ...

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