Investors are always looking for growth in small-cap stocks like Maricann Group Inc (CNSX:WAYL), with a market cap of CA$277m. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Pharmaceuticals industry, especially ones that are currently loss-making, are more likely to be higher risk. Assessing first and foremost the financial health is vital. Here are few basic financial health checks you should consider before taking the plunge. However, this commentary is still very high-level, so I recommend you dig deeper yourself into WAYL here.
Does WAYL produce enough cash relative to debt?
WAYL has built up its total debt levels in the last twelve months, from CA$61k to CA$17m , which is made up of current and long term debt. With this growth in debt, WAYL currently has CA$8.3m remaining in cash and short-term investments 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 WAYL’s operating efficiency ratios such as ROA here.
Can WAYL pay its short-term liabilities?
With current liabilities at CA$13m, the company has been able to meet these commitments with a current assets level of CA$19m, leading to a 1.46x current account ratio. For Pharmaceuticals companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can WAYL service its debt comfortably?
WAYL’s level of debt is appropriate relative to its total equity, at 18%. This range is considered safe as WAYL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with WAYL, and the company has plenty of headroom and ability to raise debt should it need to in the future.
WAYL’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for WAYL’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Maricann Group to get a better picture of the stock by looking at:
- Valuation: What is WAYL 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 WAYL is currently mispriced by the market.
- Historical Performance: What has WAYL’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.