Investors are always looking for growth in small-cap stocks like Cesca Therapeutics Inc (NASDAQ:KOOL), with a market cap of $31.51M. 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. Evaluating financial health as part of your investment thesis is vital. I believe these basic checks tell most of the story you need to know. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into KOOL here.
Does KOOL generate an acceptable amount of cash through operations?
KOOL’s debt levels surged from $2.5M to $3.5M over the last 12 months , which is made up of current and long term debt. With this rise in debt, KOOL currently has $3.6M remaining in cash and short-term investments , ready to deploy into the business. However, 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 KOOL’s operating efficiency ratios such as ROA here.
Can KOOL meet its short-term obligations with the cash in hand?
With current liabilities at $4.5M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.47x. For medical equipment companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can KOOL service its debt comfortably?With a debt-to-equity ratio of 16.22%, KOOL’s debt level may be seen as prudent. This range is considered safe as KOOL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with KOOL, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Are you a shareholder? KOOL’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may be different. You should always be keeping on top of market expectations for KOOL’s future growth on our free analysis platform.
Are you a potential investor? Cesca Therapeutics currently has financial flexibility to ramp up growth in the future. Furthermore, its high liquidity ensures the company will continue to operate smoothly should unfavourable circumstances arise. In order to build your conviction in the stock, you need to further analyse KOOL’s track record. As a following step, you should take a look at KOOL’s past performance analysis on our free platform to figure out KOOL’s financial health position.