Investors are always looking for growth in small-cap stocks like Unibios Holdings SA (ATH:BIOSK), with a market cap of €1.58m. However, an important fact which most ignore is: how financially healthy is the business? Given that BIOSK is not presently profitable, it’s essential 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, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into BIOSK here.
Does BIOSK produce enough cash relative to debt?
BIOSK’s debt levels surged from €6.19m to €7.73m over the last 12 months . With this growth in debt, the current cash and short-term investment levels stands at €108.35k for investing into the business. However, BIOSK is only generating cash from operations of €51.58k in the last twelve months, resulting in an operating cash to total debt ratio of less than 1x, indicating that its operating cash is not sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In BIOSK’s case, it generates less than 1x cash from its debt capital.
Can BIOSK meet its short-term obligations with the cash in hand?
At the current liabilities level of €7.17m liabilities, it appears that the company has not been able to meet these commitments with a current assets level of €5.31m, leading to a 0.74x current account ratio. which is under the appropriate industry ratio of 3x.
Can BIOSK service its debt comfortably?With a debt-to-equity ratio of 89.31%, BIOSK can be considered as an above-average leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since BIOSK is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
With a high level of debt on its balance sheet, BIOSK could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for BIOSK to increase its operational efficiency. In addition to this, 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 suggest 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.
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 email@example.com.