Hudson Global Inc (NASDAQ:HSON) is a small-cap stock with a market capitalization of US$61.59M. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that HSON is not presently profitable, it’s vital to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I recommend you dig deeper yourself into HSON here.
Does HSON generate an acceptable amount of cash through operations?
Over the past year, HSON has ramped up its debt from US$2.66M to US$7.98M . With this growth in debt, HSON currently has US$21.32M remaining in cash and short-term investments , ready to deploy 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. For this article’s sake, I won’t be looking at this today, but you can examine some of HSON’s operating efficiency ratios such as ROA here.
Does HSON’s liquid assets cover its short-term commitments?
Looking at HSON’s most recent US$50.58M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$84.14M, with a current ratio of 1.66x. For Professional Services companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Is HSON’s debt level acceptable?With debt at 18.67% of equity, HSON may be thought of as appropriately levered. This range is considered safe as HSON is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. HSON’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.
Although HSON’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. This is only a rough assessment of financial health, and I’m sure HSON has company-specific issues impacting its capital structure decisions. I recommend you continue to research Hudson Global to get a better picture of the stock by looking at:
- 1. Valuation: What is HSON 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 HSON is currently mispriced by the market.
- 2. Historical Performance: What has HSON’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.