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Allena Pharmaceuticals Inc (ALNA): Time For A Financial Health Check

Kyle Sanford

Investors are always looking for growth in small-cap stocks like Allena Pharmaceuticals Inc (NASDAQ:ALNA), with a market cap of USD $238.80M. However, an important fact which most ignore is: how financially healthy is the company? The significance of doing due diligence on a company’s financial strength stems from the fact that over 20,000 companies go bankrupt in every quarter in the US alone. Thus, it becomes utmost important for an investor to test a company’s resilience for such contingencies. In simple terms, I believe these three small calculations tell most of the story you need to know. View our latest analysis for Allena Pharmaceuticals

Does ALNA generate enough cash through operations?

NasdaqGS:ALNA Historical Debt Nov 10th 17
NasdaqGS:ALNA Historical Debt Nov 10th 17

Unxpected adverse events, such as natural disasters and wars, can be a true test of a company’s capacity to meet its obligations. These adverse events bring devastation and yet does not absolve the company from its debt. Can ALNA pay off what it owes to its debtholder by using only cash from its operational activities? ALNA’s recent operating cash flow was -2.46 times its debt within the past year. This means what ALNA can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at ALNA’s operations at this point in time.

Can ALNA meet its short-term obligations with the cash in hand?

What about its commitments to other stakeholders such as payments to suppliers and employees? As cash flow from operation is hindered by adverse events, ALNA may need to liquidate its short-term assets to meet these upcoming payments. We test for ALNA’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that ALNA is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.

Does ALNA face the risk of succumbing to its debt-load?

A substantially higher debt poses a significant threat to a company’s profitability during a downturn. For ALNA, the debt-to-equity ratio is 36.59%, which means its risk of facing a debt-overhang is very low.

Next Steps:

Are you a shareholder? Although ALNA’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 an ability to meet its near term obligations should an adverse event occur. Given that its financial position may be different. I suggest researching market expectations for ALNA’s future growth on our free analysis platform.

Are you a potential investor? ALNA’s low-debt position gives it headroom for future growth funding in the future. Furthermore, its high liquidity ensures the company will continue to operate smoothly should unfavourable circumstances arise. To gain more conviction in the stock, you need to also analyse ALNA’s track record. As a following step, you should take a look at ALNA’s past performance analysis on our free platform to figure out ALNA’s financial health position.

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.