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.
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.