Is Cibox Inter@ctive (EPA:CIB) A Financially Sound Company?

While small-cap stocks, such as Cibox Inter@ctive (EPA:CIB) with its market cap of €21.28m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Tech companies, even ones that are profitable, are inclined towards being higher risk. Evaluating financial health as part of your investment thesis is essential. 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 suggest you dig deeper yourself into CIB here.

Does CIB produce enough cash relative to debt?

In the previous 12 months, CIB's rose by about €2.00m , which is mainly comprised of near term debt. With this increase in debt, CIB currently has €2.93m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of CIB’s operating efficiency ratios such as ROA here.

Can CIB pay its short-term liabilities?

With current liabilities at €5.27m, the company has been able to meet these obligations given the level of current assets of €8.48m, with a current ratio of 1.61x. Usually, for Tech companies, this is a suitable ratio as there's enough of a cash buffer without holding too capital in low return investments.

Is CIB’s debt level acceptable?

CIB is a relatively highly levered company with a debt-to-equity of 53.57%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether CIB is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In CIB's, case, the ratio of 1.4x suggests that interest is not strongly covered, which means that lenders may be more reluctant to lend out more funding as CIB’s low interest coverage already puts the company at higher risk of default.

Next Steps:

CIB’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I'm sure CIB has company-specific issues impacting its capital structure decisions. You should continue to research Cibox Inter@ctive to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for CIB’s future growth? Take a look at our free research report of analyst consensus for CIB’s outlook.
2. Historical Performance: What has CIB'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.
3. 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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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.