What does CropLogic Limited’s (ASX:CLI) Balance Sheet Tell Us About Its Future?

Investors are always looking for growth in small-cap stocks like CropLogic Limited (ASX:CLI), with a market cap of AU$6.53M. However, an important fact which most ignore is: how financially healthy is the business? Given that CLI is not presently profitable, it’s crucial to understand the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into CLI here.

Does CLI generate an acceptable amount of cash through operations?

the current cash and short-term investment levels stands at AU$79.83K , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can assess some of CLI’s operating efficiency ratios such as ROA here.

Can CLI meet its short-term obligations with the cash in hand?

Looking at CLI’s most recent AU$1.25M liabilities, it seems that the business has not been able to meet these commitments with a current assets level of AU$132.57K, leading to a 0.11x current account ratio. which is under the appropriate industry ratio of 3x.

ASX:CLI Historical Debt Mar 14th 18
ASX:CLI Historical Debt Mar 14th 18

Does CLI face the risk of succumbing to its debt-load?

With debt at 5.98% of equity, CLI may be thought of as having low leverage. CLI is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for CLI, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

CLI’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. Furthermore, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. This is only a rough assessment of financial health, and I’m sure CLI has company-specific issues impacting its capital structure decisions. I recommend you continue to research CropLogic to get a better picture of the stock by looking at: