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Investors are always looking for growth in small-cap stocks like Unibios Holdings S.A. (ATH:BIOSK), with a market cap of €1.0m. However, an important fact which most ignore is: how financially healthy is the business? Given that BIOSK is not presently profitable, it’s crucial to understand the current state of its operations and pathway to profitability. Let’s work through some financial health checks you may wish to consider if you’re interested in this stock. Nevertheless, potential investors would need to take a closer look, and I recommend you dig deeper yourself into BIOSK here.
Does BIOSK Produce Much Cash Relative To Its Debt?
BIOSK has built up its total debt levels in the last twelve months, from €7.7m to €8.8m – this includes long-term debt. With this rise in debt, BIOSK currently has €65k remaining in cash and short-term investments to keep the business going. We note it produced negative cash flow over the last twelve months. 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 BIOSK’s operating efficiency ratios such as ROA here.
Can BIOSK pay its short-term liabilities?
At the current liabilities level of €7.8m, it seems that the business may not have an easy time meeting these commitments with a current assets level of €6.3m, leading to a current ratio of 0.81x. The current ratio is the number you get when you divide current assets by current liabilities.
Is BIOSK’s debt level acceptable?
With total debt exceeding equity, BIOSK is considered a highly levered company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. However, since BIOSK is presently unprofitable, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Although BIOSK’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. Though its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how BIOSK has been performing in the past. I recommend you continue to research Unibios Holdings to get a better picture of the stock by looking at:
- Historical Performance: What has BIOSK’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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.