Investors are always looking for growth in small-cap stocks like MYCELX Technologies Corporation (LON:MYX), with a market cap of US$16.89m. However, an important fact which most ignore is: how financially healthy is the business? Given that MYX is not presently profitable, it’s vital to understand the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into MYX here.
How does MYX’s operating cash flow stack up against its debt?
Over the past year, MYX has maintained its debt levels at around US$1.92m made up of current and long term debt. At this current level of debt, MYX's cash and short-term investments stands at US$5.17m , ready to deploy into the business. On top of this, MYX has produced US$194.00k in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 10.10%, signalling that MYX’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In MYX’s case, it is able to generate 0.1x cash from its debt capital.
Can MYX meet its short-term obligations with the cash in hand?
With current liabilities at US$1.85m, the company has been able to meet these obligations given the level of current assets of US$11.90m, with a current ratio of 6.44x. Though, a ratio greater than 3x may be considered as too high, as MYX could be holding too much capital in a low-return investment environment.
Can MYX service its debt comfortably?MYX’s level of debt is appropriate relative to its total equity, at 10.78%. MYX is not taking on too much debt commitment, which may be constraining for future growth. MYX'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.
MYX’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how MYX has been performing in the past. I recommend you continue to research MYCELX Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MYX’s future growth? Take a look at our free research report of analyst consensus for MYX’s outlook.
- Valuation: What is MYX 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 MYX 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.
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.