What Does Alcanna Inc.'s (TSE:CLIQ) Balance Sheet Tell Us About It?

Investors are always looking for growth in small-cap stocks like Alcanna Inc. (TSE:CLIQ), with a market cap of CA$228m. However, an important fact which most ignore is: how financially healthy is the business? Given that CLIQ is not presently profitable, it’s crucial to understand 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. However, this is not a comprehensive overview, so I recommend you dig deeper yourself into CLIQ here.

CLIQ’s Debt (And Cash Flows)

CLIQ's debt levels have fallen from CA$102m to CA$73m over the last 12 months – this includes long-term debt. With this reduction in debt, CLIQ currently has CA$64m remaining in cash and short-term investments , ready to be used for running the business. Moving on, operating cash flow was negative over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can assess some of CLIQ’s operating efficiency ratios such as ROA here.

Does CLIQ’s liquid assets cover its short-term commitments?

With current liabilities at CA$54m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.17x. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, a ratio greater than 3x may be considered high by some.

Is CLIQ’s debt level acceptable?

With a debt-to-equity ratio of 45%, CLIQ 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 CLIQ is currently loss-making, 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.

Next Steps:

CLIQ’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. Since there is also no concerns around CLIQ's liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for CLIQ's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Alcanna to get a better picture of the small-cap by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for CLIQ’s future growth? Take a look at our free research report of analyst consensus for CLIQ’s outlook.
2. Valuation: What is CLIQ 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 CLIQ is currently mispriced by the market.
3. 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.

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