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Investors are always looking for growth in small-cap stocks like LiveXLive Media, Inc. (NASDAQ:LIVX), with a market cap of US$196m. However, an important fact which most ignore is: how financially healthy is the business? Since LIVX is loss-making right now, it’s crucial to assess the current state of its operations and pathway to profitability. We’ll look at some basic checks that can form a snapshot the company’s financial strength. Nevertheless, these checks don’t give you a full picture, so I suggest you dig deeper yourself into LIVX here.
Does LIVX Produce Much Cash Relative To Its Debt?
LIVX’s debt levels surged from US$8.6m to US$15m over the last 12 months – this includes long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$14m to keep the business going. Its negative operating cash flow means calculating cash-to-debt wouldn’t be useful. 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 LIVX’s operating efficiency ratios such as ROA here.
Can LIVX meet its short-term obligations with the cash in hand?
At the current liabilities level of US$37m, it seems that the business arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.52x. The current ratio is the number you get when you divide current assets by current liabilities.
Does LIVX face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 99%, LIVX can be considered as an above-average leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. Though, since LIVX is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
LIVX’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I’m sure LIVX has company-specific issues impacting its capital structure decisions. You should continue to research LiveXLive Media to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LIVX’s future growth? Take a look at our free research report of analyst consensus for LIVX’s outlook.
- Valuation: What is LIVX worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether LIVX is currently mispriced by the market.
- 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.