Cross Country Healthcare, Inc. (NASDAQ:CCRN) is a small-cap stock with a market capitalization of US$343m. 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 vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, since I only look at basic financial figures, I recommend you dig deeper yourself into CCRN here.
How much cash does CCRN generate through its operations?
CCRN has sustained its debt level by about US$91m over the last 12 months – this includes long-term debt. At this constant level of debt, CCRN currently has US$28m remaining in cash and short-term investments for investing into the business. On top of this, CCRN has generated US$39m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 43%, signalling that CCRN’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CCRN’s case, it is able to generate 0.43x cash from its debt capital.
Can CCRN pay its short-term liabilities?
Looking at CCRN’s US$92m in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.24x. For Healthcare companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too much capital in low return investments.
Can CCRN service its debt comfortably?
With debt at 38% of equity, CCRN may be thought of as appropriately levered. CCRN is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether CCRN is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In CCRN’s, case, the ratio of 4.1x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
CCRN’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure CCRN has company-specific issues impacting its capital structure decisions. I suggest you continue to research Cross Country Healthcare to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CCRN’s future growth? Take a look at our free research report of analyst consensus for CCRN’s outlook.
- Valuation: What is CCRN 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 CCRN 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
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