Aethlon Medical Inc (NASDAQ:AEMD) is a small-cap stock with a market capitalization of US$21.04M. 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 Medical Equipment industry, in particular ones that run negative earnings, are inclined towards being 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. However, I know these factors are very high-level, so I suggest you dig deeper yourself into AEMD here.
Does AEMD generate enough cash through operations?
AEMD’s debt level has been constant at around US$519.20K over the previous year made up of current and long term debt. At this stable level of debt, AEMD currently has US$1.56M remaining in cash and short-term investments 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 take a look at some of AEMD’s operating efficiency ratios such as ROA here.
Can AEMD pay its short-term liabilities?
With current liabilities at US$611.76K, it seems that the business has been able to meet these obligations given the level of current assets of US$1.60M, with a current ratio of 2.61x. Usually, for Medical Equipment companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can AEMD service its debt comfortably?
With debt at 17.61% of equity, AEMD may be thought of as appropriately levered. This range is considered safe as AEMD is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with AEMD, and the company has plenty of headroom and ability to raise debt should it need to in the future.
AEMD’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure AEMD has company-specific issues impacting its capital structure decisions. I suggest you continue to research Aethlon Medical to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AEMD’s future growth? Take a look at our free research report of analyst consensus for AEMD’s outlook.
- Historical Performance: What has AEMD’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 pass 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.