Apollo Medical Holdings Inc (NASDAQ:AMEH) is a small-cap stock with a market capitalization of US$482.87M. 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? Healthcare companies, even ones that are profitable, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. I believe these basic checks tell most of the story you need to know. However, this commentary is still very high-level, so I suggest you dig deeper yourself into AMEH here.
Does AMEH generate an acceptable amount of cash through operations?
Over the past year, AMEH has ramped up its debt from US$102.35K to US$6.25M – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$102.91M for investing into the business. On top of this, AMEH has generated US$51.93M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 830.45%, meaning that AMEH’s current level of operating cash is high enough to cover 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.
Can AMEH pay its short-term liabilities?
With current liabilities at US$109.60M, it appears that the company 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 as there’s enough of a cash buffer without holding too capital in low return investments.
Is AMEH’s debt level acceptable?AMEH’s level of debt is low relative to its total equity, at 1.86%. AMEH is not taking on too much debt commitment, 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. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for AMEH’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Apollo Medical Holdings to get a better picture of the stock by looking at:
- 1. 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.
- 2. Historical Performance: What has AMEH’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.