While small-cap stocks, such as HTG Molecular Diagnostics Inc (NASDAQ:HTGM) with its market cap of US$99.87M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Healthcare Services companies, in particular ones that run negative earnings, are inclined towards being higher 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, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into HTGM here.
Does HTGM generate enough cash through operations?
HTGM has shrunken its total debt levels in the last twelve months, from US$11.78M to US$8.75M , which comprises of short- and long-term debt. With this debt payback, HTGM’s cash and short-term investments stands at US$9.97M , ready to deploy 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. For this article’s sake, I won’t be looking at this today, but you can take a look at some of HTGM’s operating efficiency ratios such as ROA here.
Can HTGM pay its short-term liabilities?
Looking at HTGM’s most recent US$13.34M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.35x. For Healthcare 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.
Does HTGM face the risk of succumbing to its debt-load?With debt at 30.84% of equity, HTGM may be thought of as appropriately levered. This range is considered safe as HTGM is not taking on too much debt obligation, which may be constraining for future growth. HTGM’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 HTGM’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 proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for HTGM’s financial health. Other important fundamentals need to be considered alongside. You should continue to research HTG Molecular Diagnostics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HTGM’s future growth? Take a look at our free research report of analyst consensus for HTGM’s outlook.
- Historical Performance: What has HTGM’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.
- 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.