Glacier Media Inc (TSE:GVC) is a small-cap stock with a market capitalization of CA$87.99m. 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 GVC is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into GVC here.
How much cash does GVC generate through its operations?
GVC has shrunken its total debt levels in the last twelve months, from CA$53.61m to CA$43.96m , which is made up of current and long term debt. With this debt repayment, GVC’s cash and short-term investments stands at CA$3.89m , ready to deploy into the business. On top of this, GVC has generated cash from operations of CA$12.01m over the same time period, resulting in an operating cash to total debt ratio of 27.31%, signalling that GVC’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires positive earnings. In GVC’s case, it is able to generate 0.27x cash from its debt capital.
Can GVC pay its short-term liabilities?
Looking at GVC’s most recent CA$39.88m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of CA$43.65m, with a current ratio of 1.09x. Generally, for Media companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Is GVC’s debt level acceptable?GVC’s level of debt is appropriate relative to its total equity, at 27.85%. GVC is not taking on too much debt commitment, which may be constraining for future growth. Investors’ risk associated with debt is very low with GVC, and the company has plenty of headroom and ability to raise debt should it need to in the future.
GVC’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for GVC’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Glacier Media to get a better picture of the stock by looking at:
- Valuation: What is GVC 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 GVC is currently mispriced by the market.
- Historical Performance: What has GVC’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.