HTG Molecular Diagnostics Inc (NASDAQ:HTGM) is a small-cap stock with a market capitalization of US$97.03m. 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 Services companies, in particular ones that run negative earnings, are more likely to be higher risk. Evaluating financial health as part of your investment thesis is crucial. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into HTGM here.
How much cash does HTGM generate through its operations?
HTGM’s debt levels have fallen from US$11.78m to US$8.75m over the last 12 months , which is made up of current and long term debt. With this reduction in debt, HTGM’s cash and short-term investments stands at US$9.97m , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. 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 HTGM’s operating efficiency ratios such as ROA here.
Can HTGM pay its short-term liabilities?
With current liabilities at US$13.34m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.35x. Usually, for Healthcare Services companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can HTGM service its debt comfortably?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. Investors’ risk associated with debt is very low with HTGM, and the company has plenty of headroom and ability to raise debt should it need to in the future.
HTGM’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 exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for HTGM’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research HTG Molecular Diagnostics to get a more holistic view 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.