Investors are always looking for growth in small-cap stocks like Everspin Technologies Inc (NASDAQ:MRAM), with a market cap of US$149.08M. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Semiconductor industry, in particular ones that run negative earnings, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. I believe these basic checks tell most of the story you need to know. Nevertheless, I know these factors are very high-level, so I suggest you dig deeper yourself into MRAM here.
How does MRAM’s operating cash flow stack up against its debt?
MRAM’s debt level has been constant at around US$8.10M over the previous year comprising of short- and long-term debt. At this current level of debt, MRAM’s cash and short-term investments stands at US$29.73M 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 examine some of MRAM’s operating efficiency ratios such as ROA here.
Does MRAM’s liquid assets cover its short-term commitments?
Looking at MRAM’s most recent US$10.38M 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 3.8x. However, anything about 3x may be excessive, since MRAM may be leaving too much capital in low-earning investments.
Is MRAM’s debt level acceptable?With debt reaching 85.52% of equity, MRAM may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since MRAM is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
At its current level of cash flow coverage, MRAM has room for improvement to better cushion for events which may require debt repayment. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure MRAM has company-specific issues impacting its capital structure decisions. You should continue to research Everspin Technologies to get a better picture of the stock by looking at:
- 1. 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.
- 2. 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.
- 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.