What does AtriCure Inc's (NASDAQ:ATRC) Balance Sheet Tell Us About Its Future?

Investors are always looking for growth in small-cap stocks like AtriCure Inc (NASDAQ:ATRC), with a market cap of US$620.53M. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Medical Equipment industry, especially ones that are currently loss-making, tend to be high risk. So, understanding the company's financial health becomes crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, this commentary is still very high-level, so I suggest you dig deeper yourself into ATRC here.

Does ATRC generate enough cash through operations?

ATRC's debt levels surged from US$14.16M to US$38.89M over the last 12 months , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$44.01M 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 ATRC’s operating efficiency ratios such as ROA here.

Can ATRC pay its short-term liabilities?

With current liabilities at US$28.83M, the company has been able to meet these commitments with a current assets level of US$85.72M, leading to a 2.97x current account ratio. Generally, for Medical Equipment companies, this is a reasonable ratio as there's enough of a cash buffer without holding too capital in low return investments.

Can ATRC service its debt comfortably?

With a debt-to-equity ratio of 24.35%, ATRC's debt level may be seen as prudent. ATRC is not taking on too much debt commitment, which may be constraining for future growth. Investors' risk associated with debt is very low with ATRC, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

ATRC’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I'm sure ATRC has company-specific issues impacting its capital structure decisions. I recommend you continue to research AtriCure to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for ATRC’s future growth? Take a look at our free research report of analyst consensus for ATRC’s outlook.
• 2. Historical Performance: What has ATRC'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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.