While small-cap stocks, such as TVA Group Inc (TSE:TVA.B) with its market cap of CA$146.90m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since TVA.B is loss-making right now, it’s crucial to assess the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. However, since I only look at basic financial figures, I recommend you dig deeper yourself into TVA.B here.
How much cash does TVA.B generate through its operations?
TVA.B’s debt levels have fallen from CA$69.12m to CA$62.55m over the last 12 months , which comprises of short- and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at CA$21.26m , ready to deploy into the business. On top of this, TVA.B has produced cash from operations of CA$33.29m during the same period of time, resulting in an operating cash to total debt ratio of 53.22%, signalling that TVA.B’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires positive earnings. In TVA.B’s case, it is able to generate 0.53x cash from its debt capital.
Can TVA.B pay its short-term liabilities?
Looking at TVA.B’s most recent CA$217.57m liabilities, it seems that the business has been able to meet these commitments with a current assets level of CA$249.94m, leading to a 1.15x current account ratio. Usually, for Media companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does TVA.B face the risk of succumbing to its debt-load?
With debt at 23.30% of equity, TVA.B may be thought of as appropriately levered. This range is considered safe as TVA.B is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. TVA.B’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.Next Steps:
TVA.B has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how TVA.B has been performing in the past. I recommend you continue to research TVA Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TVA.B’s future growth? Take a look at our free research report of analyst consensus for TVA.B’s outlook.
- Valuation: What is TVA.B 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 TVA.B is currently mispriced by the market.
- 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.