Youngevity International, Inc. (NASDAQ:YGYI) is a small-cap stock with a market capitalization of US$144m. 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? Given that YGYI is not presently profitable, it’s essential to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into YGYI here.
How does YGYI’s operating cash flow stack up against its debt?
YGYI has shrunken its total debt levels in the last twelve months, from US$20m to US$17m , which includes long-term debt. With this debt payback, YGYI’s cash and short-term investments stands at US$2.3m for investing 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 assess some of YGYI’s operating efficiency ratios such as ROA here.
Can YGYI meet its short-term obligations with the cash in hand?
With current liabilities at US$47m, it appears that the company may not have an easy time meeting these commitments with a current assets level of US$37m, leading to a current ratio of 0.79x.
Can YGYI service its debt comfortably?
YGYI is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since YGYI is presently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Although YGYI’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. Though its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I’m sure YGYI has company-specific issues impacting its capital structure decisions. I suggest you continue to research Youngevity International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for YGYI’s future growth? Take a look at our free research report of analyst consensus for YGYI’s outlook.
- Valuation: What is YGYI 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 YGYI 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.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.