Investors are always looking for growth in small-cap stocks like Coro Mining Corp (TSE:COP), with a market cap of US$65.19m. However, an important fact which most ignore is: how financially healthy is the business? Given that COP is not presently profitable, it’s crucial to evaluate 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 COP here.
Does COP produce enough cash relative to debt?
COP has built up its total debt levels in the last twelve months, from US$817.00k to US$8.47m , which is made up of current and long term debt. With this rise in debt, the current cash and short-term investment levels stands at US$1.91m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of COP’s operating efficiency ratios such as ROA here.
Does COP’s liquid assets cover its short-term commitments?
Looking at COP’s most recent US$19.61m liabilities, the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.45x, which is below the prudent industry ratio of 3x.
Is COP’s debt level acceptable?COP is a relatively highly levered company with a debt-to-equity of 45.29%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since COP 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.
COP’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Furthermore, its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how COP has been performing in the past. I recommend you continue to research Coro Mining to get a better picture of the stock by looking at:
- Historical Performance: What has COP’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.