While small-cap stocks, such as Altyn Plc (LSE:ALTN) with its market cap of UK£30.17M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since ALTN is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, this commentary is still very high-level, so I suggest you dig deeper yourself into ALTN here.
How does ALTN’s operating cash flow stack up against its debt?
Over the past year, ALTN has ramped up its debt from US$6.68M to US$16.42M , which is made up of current and long term debt. With this rise in debt, ALTN’s cash and short-term investments stands at US$2.24M , ready to deploy 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 assess some of ALTN’s operating efficiency ratios such as ROA here.
Can ALTN pay its short-term liabilities?
With current liabilities at US$10.98M, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.61x, which is below the prudent industry ratio of 3x.
Can ALTN service its debt comfortably?
ALTN is a relatively highly levered company with a debt-to-equity of 45.74%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since ALTN is currently unprofitable, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
ALTN’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Furthermore, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for ALTN’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Altyn to get a better picture of the stock by looking at:
- 1. Historical Performance: What has ALTN’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.
- 2. 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.