PAR Technology Corporation (NYSE:PAR): Time For A Financial Health Check

Investors are always looking for growth in small-cap stocks like PAR Technology Corporation (NYSE:PAR), with a market cap of US$225.59M. However, an important fact which most ignore is: how financially healthy is the business? Electronic companies, especially ones that are currently loss-making, tend to be high risk. Evaluating financial health as part of your investment thesis is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, I know these factors are very high-level, so I suggest you dig deeper yourself into PAR here.

Does PAR generate enough cash through operations?

PAR has built up its total debt levels in the last twelve months, from US$566.00K to US$1.33M , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$6.60M for investing into the business. Additionally, PAR has produced US$314.00K in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 23.61%, meaning that PAR’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In PAR’s case, it is able to generate 0.24x cash from its debt capital.

Can PAR pay its short-term liabilities?

Looking at PAR’s most recent US$38.59M 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 1.62x. Usually, for Electronic companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

Is PAR’s debt level acceptable?

With a debt-to-equity ratio of 1.93%, PAR's debt level is relatively low. PAR is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for PAR, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

PAR’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 will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for PAR's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research PAR Technology to get a more holistic view of the stock by looking at:

• 1. Valuation: What is PAR 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 PAR is currently mispriced by the market.
• 2. Historical Performance: What has PAR'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.