Investors are always looking for growth in small-cap stocks like iClick Interactive Asia Group Limited (NASDAQ:ICLK), with a market cap of US$340.51m. However, an important fact which most ignore is: how financially healthy is the business? Internet companies, especially ones that are currently loss-making, are more likely to be higher risk. So, understanding the company’s financial health becomes vital. 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 suggest you dig deeper yourself into ICLK here.
How does ICLK’s operating cash flow stack up against its debt?
Over the past year, ICLK has reduced its debt from US$12.98m to US$10.49m , which is mainly comprised of near term debt. With this debt repayment, the current cash and short-term investment levels stands at US$46.65m , ready to deploy 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. For this article’s sake, I won’t be looking at this today, but you can take a look at some of ICLK’s operating efficiency ratios such as ROA here.
Can ICLK meet its short-term obligations with the cash in hand?
Looking at ICLK’s most recent US$65.68m liabilities, the company has been able to meet these commitments with a current assets level of US$127.43m, leading to a 1.94x current account ratio. Generally, for Internet companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can ICLK service its debt comfortably?With debt at 8.95% of equity, ICLK may be thought of as having low leverage. This range is considered safe as ICLK is not taking on too much debt obligation, which may be constraining for future growth. ICLK’s risk around capital structure is almost non-existent, and the company has the headroom and ability to raise debt should it need to in the future.
Although ICLK’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure ICLK has company-specific issues impacting its capital structure decisions. I recommend you continue to research iClick Interactive Asia Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ICLK’s future growth? Take a look at our free research report of analyst consensus for ICLK’s outlook.
- Valuation: What is ICLK 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 ICLK is currently mispriced by the market.
- 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.