Glacier Media Inc. (TSE:GVC) is a small-cap stock with a market capitalization of CA$60m. 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? Given that GVC is not presently profitable, it’s essential to evaluate 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’d encourage you to dig deeper yourself into GVC here.
Does GVC Produce Much Cash Relative To Its Debt?
GVC has shrunk its total debt levels in the last twelve months, from CA$46m to CA$43m – this includes long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at CA$3.7m to keep the business going. On top of this, GVC has produced cash from operations of CA$9.4m in the last twelve months, leading to an operating cash to total debt ratio of 22%, meaning that GVC’s current level of operating cash is high enough to cover debt.
Can GVC pay its short-term liabilities?
With current liabilities at CA$43m, the company may not have an easy time meeting these commitments with a current assets level of CA$40m, leading to a current ratio of 0.93x. The current ratio is the number you get when you divide current assets by current liabilities.
Can GVC service its debt comfortably?
GVC’s level of debt is appropriate relative to its total equity, at 28%. This range is considered safe as GVC is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for GVC, and the company also has the ability and headroom to increase debt if needed going forward.
GVC’s debt level is appropriate for a company its size. Furthermore, it is able to generate sufficient cash flow coverage, meaning it is able to put its debt in good use. However, its lack of liquidity raises questions over current asset management practices for the small-cap. 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 more holistic view 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.
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