Stock Analysis

    BetterU Education Corp (CVE:BTRU): Time For A Financial Health Check

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    BetterU Education Corp (TSXV:BTRU) is a small-cap stock with a market capitalization of CA$48.59M. 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? Since BTRU is loss-making right now, it’s essential to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into BTRU here.

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    Does BTRU generate enough cash through operations?

    BTRU has shrunken its total debt levels in the last twelve months, from CA$2.56M to CA$623.88K – this includes both the current and long-term debt. With this reduction in debt, BTRU's cash and short-term investments stands at CA$735.14K , 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 examine some of BTRU’s operating efficiency ratios such as ROA here.

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

    Looking at BTRU’s most recent CA$1.69M liabilities, it seems that the business has been able to meet these commitments with a current assets level of CA$1.94M, leading to a 1.14x current account ratio. For Consumer Services companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too capital in low return investments.

    TSXV:BTRU Historical Debt Mar 1st 18
    TSXV:BTRU Historical Debt Mar 1st 18

    Can BTRU service its debt comfortably?

    BTRU’s level of debt is appropriate relative to its total equity, at 30.98%. BTRU is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for BTRU, and the company also has the ability and headroom to increase debt if needed going forward.

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    BTRU’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 exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BTRU's financial health. Other important fundamentals need to be considered alongside. You should continue to research BetterU Education to get a better picture of the stock by looking at the areas below. Just a heads up - to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.

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    Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.