Investors are always looking for growth in small-cap stocks like Youngevity International Inc (NASDAQ:YGYI), with a market cap of US$78.10M. However, an important fact which most ignore is: how financially healthy is the business? Given that YGYI is not presently profitable, it’s crucial 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. Though, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into YGYI here.
Does YGYI generate enough cash through operations?
Over the past year, YGYI has ramped up its debt from US$12.75M to US$16.66M , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$869.00K , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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.
Does YGYI’s liquid assets cover its short-term commitments?
With current liabilities at US$25.31M, it seems that the business has been able to meet these commitments with a current assets level of US$28.47M, leading to a 1.12x current account ratio. Usually, for Personal Products companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is YGYI’s debt level acceptable?With total debt exceeding equities, YGYI is considered a highly levered company. 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 currently 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.
YGYI’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, 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 YGYI’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Youngevity International to get a more holistic view of the stock by looking at:
- 1. 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.
- 2. Historical Performance: What has YGYI’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.
- 3. 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.