Investors are always looking for growth in small-cap stocks like Veru Inc. (NASDAQ:VERU), with a market cap of US$89m. However, an important fact which most ignore is: how financially healthy is the business? Since VERU is loss-making right now, it’s essential to understand the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into VERU here.
Does VERU produce enough cash relative to debt?
Over the past year, VERU has borrowed debt capital of around US$9.6m including long-term debt. With this increase in debt, VERU currently has US$9.0m remaining in cash and short-term investments for investing 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. For this article’s sake, I won’t be looking at this today, but you can assess some of VERU’s operating efficiency ratios such as ROA here.
Can VERU meet its short-term obligations with the cash in hand?
At the current liabilities level of US$9.7m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.58x. Generally, for Personal Products companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can VERU service its debt comfortably?
With a debt-to-equity ratio of 26%, VERU’s debt level may be seen as prudent. This range is considered safe as VERU is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. VERU’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.
VERU’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for VERU’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Veru to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for VERU’s future growth? Take a look at our free research report of analyst consensus for VERU’s outlook.
- Historical Performance: What has VERU’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.
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