Bluebird Merchant Ventures Limited (LON:BMV) is a small-cap stock with a market capitalization of US$5.28m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Assessing first and foremost the financial health is crucial, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, I know these factors are very high-level, so I recommend you dig deeper yourself into BMV here.
How much cash does BMV generate through its operations?
Over the past year, BMV has ramped up its debt from US$92.93k to US$634.99k – this includes both the current and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$54.78k , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of BMV’s operating efficiency ratios such as ROA here.
Can BMV pay its short-term liabilities?
At the current liabilities level of US$1.73m liabilities, the company has been able to meet these commitments with a current assets level of US$5.22m, leading to a 3.02x current account ratio. However, anything about 3x may be excessive, since BMV may be leaving too much capital in low-earning investments.
Does BMV face the risk of succumbing to its debt-load?BMV’s level of debt is appropriate relative to its total equity, at 19.46%. BMV is not taking on too much debt commitment, which may be constraining for future growth.
BMV’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how BMV has been performing in the past. I suggest you continue to research Bluebird Merchant Ventures to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BMV’s future growth? Take a look at our free research report of analyst consensus for BMV’s outlook.
- Historical Performance: What has BMV’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.