Everspin Technologies Inc (NASDAQ:MRAM) is a small-cap stock with a market capitalization of US$150.56m. 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? Companies operating in the Semiconductor industry, especially ones that are currently loss-making, tend to be high risk. Evaluating financial health as part of your investment thesis is vital. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I recommend you dig deeper yourself into MRAM here.
How much cash does MRAM generate through its operations?
MRAM’s debt levels surged from US$7.43m to US$12.26m over the last 12 months , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$33.88m 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 assess some of MRAM’s operating efficiency ratios such as ROA here.
Can MRAM meet its short-term obligations with the cash in hand?
Looking at MRAM’s most recent US$13.69m liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$53.28m, leading to a 3.89x current account ratio. Though, anything above 3x is considered high and could mean that MRAM has too much idle capital in low-earning investments.
Is MRAM’s debt level acceptable?MRAM’s level of debt is appropriate relative to its total equity, at 33.42%. This range is considered safe as MRAM is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for MRAM, and the company also has the ability and headroom to increase debt if needed going forward.
MRAM’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, 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 MRAM’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Everspin Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MRAM’s future growth? Take a look at our free research report of analyst consensus for MRAM’s outlook.
- Historical Performance: What has MRAM’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.
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 firstname.lastname@example.org.