While small-cap stocks, such as The ExOne Company (NASDAQ:XONE) with its market cap of US$113.90m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Given that XONE 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. However, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into XONE here.
Does XONE produce enough cash relative to debt?
Over the past year, XONE has reduced its debt from US$1.86m to US$1.70m – this includes both the current and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$21.85m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. 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 XONE’s operating efficiency ratios such as ROA here.
Can XONE meet its short-term obligations with the cash in hand?
Looking at XONE’s most recent US$18.81m liabilities, the company has been able to meet these commitments with a current assets level of US$47.97m, leading to a 2.55x current account ratio. For Machinery companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can XONE service its debt comfortably?With debt at 2.37% of equity, XONE may be thought of as having low leverage. XONE is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. XONE’s risk around capital structure is almost non-existent, and the company has the headroom and ability to raise debt should it need to in the future.
Although XONE’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. I admit this is a fairly basic analysis for XONE’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research ExOne to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XONE’s future growth? Take a look at our free research report of analyst consensus for XONE’s outlook.
- Historical Performance: What has XONE’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.