Investors are always looking for growth in small-cap stocks like SilverSun Technologies, Inc. (NASDAQ:SSNT), with a market cap of US$15m. However, an important fact which most ignore is: how financially healthy is the business? Since SSNT is loss-making right now, it’s crucial to evaluate the current state of its operations and pathway to profitability. We’ll look at some basic checks that can form a snapshot the company’s financial strength. Nevertheless, this is not a comprehensive overview, so I recommend you dig deeper yourself into SSNT here.
Does SSNT Produce Much Cash Relative To Its Debt?
SSNT has built up its total debt levels in the last twelve months, from US$688k to US$1.8m , which accounts for long term debt. With this rise in debt, SSNT currently has US$1.8m remaining in cash and short-term investments , ready to be used for running the business. On top of this, SSNT has produced US$1.9m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 105%, indicating that SSNT’s current level of operating cash is high enough to cover debt.
Does SSNT’s liquid assets cover its short-term commitments?
At the current liabilities level of US$5.7m, the company may not have an easy time meeting these commitments with a current assets level of US$4.8m, leading to a current ratio of 0.84x. The current ratio is calculated by dividing current assets by current liabilities.
Is SSNT’s debt level acceptable?
SSNT is a relatively highly levered company with a debt-to-equity of 41%. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. But since SSNT is currently loss-making, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Although SSNT’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for SSNT’s financial health. Other important fundamentals need to be considered alongside. You should continue to research SilverSun Technologies to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SSNT’s future growth? Take a look at our free research report of analyst consensus for SSNT’s outlook.
- Valuation: What is SSNT 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 SSNT 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.
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