While small-cap stocks, such as Fluidigm Corporation (NASDAQ:FLDM) with its market cap of US$229.77M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Life Sciences industry, especially ones that are currently loss-making, tend to be high risk. Evaluating financial health as part of your investment thesis is essential. I believe these basic checks tell most of the story you need to know. Nevertheless, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into FLDM here.
How does FLDM’s operating cash flow stack up against its debt?
FLDM’s debt level has been constant at around US$195.24M over the previous year comprising of short- and long-term debt. At this stable level of debt, FLDM’s cash and short-term investments stands at US$63.14M 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of FLDM’s operating efficiency ratios such as ROA here.
Can FLDM meet its short-term obligations with the cash in hand?
At the current liabilities level of US$33.47M liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.83x. Usually, for Life Sciences companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does FLDM face the risk of succumbing to its debt-load?
FLDM 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 FLDM is currently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.Next Steps:
FLDM’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for FLDM’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Fluidigm to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for FLDM’s future growth? Take a look at our free research report of analyst consensus for FLDM’s outlook.
- 2. Historical Performance: What has FLDM’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.