StartMonday Technology Corp (CNSX:JOB) is a small-cap stock with a market capitalization of CA$5.17m. 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? Software companies, especially ones that are currently loss-making, tend to be high risk. Evaluating financial health as part of your investment thesis is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into JOB here.
How much cash does JOB generate through its operations?
In the previous 12 months, JOB’s rose by about CA$645.00k , which is mainly comprised of near term debt. With this ramp up in debt, JOB currently has CA$1.87m remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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 examine some of JOB’s operating efficiency ratios such as ROA here.
Can JOB meet its short-term obligations with the cash in hand?
With current liabilities at CA$1.06m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.95x. For Software companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is JOB’s debt level acceptable?JOB’s level of debt is appropriate relative to its total equity, at 36.91%. JOB is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with JOB, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Although JOB’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, 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 JOB has been performing in the past. I suggest you continue to research StartMonday Technology to get a better picture of the stock by looking at:
- Historical Performance: What has JOB’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.