Investors are always looking for growth in small-cap stocks like Apollo Medical Holdings Inc (NASDAQ:AMEH), with a market cap of US$811.35m. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Healthcare industry, even ones that are profitable, are more likely to be higher risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into AMEH here.
How much cash does AMEH generate through its operations?
Over the past year, AMEH has ramped up its debt from US$102.35k to US$6.25m , which is mainly comprised of near term debt. With this rise in debt, AMEH currently has US$102.91m remaining in cash and short-term investments , ready to deploy into the business. Additionally, AMEH has produced cash from operations of US$51.93m during the same period of time, resulting in an operating cash to total debt ratio of 830.45%, signalling that AMEH’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In AMEH’s case, it is able to generate 8.3x cash from its debt capital.
Does AMEH’s liquid assets cover its short-term commitments?
At the current liabilities level of US$109.60m liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$144.16m, leading to a 1.32x current account ratio. Generally, for Healthcare companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does AMEH face the risk of succumbing to its debt-load?With debt at 1.69% of equity, AMEH may be thought of as having low leverage. This range is considered safe as AMEH is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
AMEH’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for AMEH’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Apollo Medical Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AMEH’s future growth? Take a look at our free research report of analyst consensus for AMEH’s outlook.
- Valuation: What is AMEH 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 AMEH 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.