Is Avino Silver & Gold Mines Ltd.’s (TSE:ASM) Balance Sheet A Threat To Its Future?
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Investors are always looking for growth in small-cap stocks like Avino Silver & Gold Mines Ltd. (TSE:ASM), with a market cap of CA$60m. However, an important fact which most ignore is: how financially healthy is the business? Evaluating financial health as part of your investment thesis is vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into ASM here.
Does ASM produce enough cash relative to debt?
ASM has shrunken its total debt levels in the last twelve months, from US$12m to US$10m – this includes long-term debt. With this debt payback, ASM currently has US$7.1m remaining in cash and short-term investments , ready to deploy into the business. On top of this, ASM has generated US$10m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 103%, signalling that ASM’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In ASM’s case, it is able to generate 1.03x cash from its debt capital.
Can ASM meet its short-term obligations with the cash in hand?
At the current liabilities level of US$18m, the company has been able to meet these obligations given the level of current assets of US$27m, with a current ratio of 1.5x. Generally, for Metals and Mining companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can ASM service its debt comfortably?
ASM’s level of debt is appropriate relative to its total equity, at 13%. This range is considered safe as ASM is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
ASM has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure ASM has company-specific issues impacting its capital structure decisions. I suggest you continue to research Avino Silver & Gold Mines to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ASM’s future growth? Take a look at our free research report of analyst consensus for ASM’s outlook.
Historical Performance: What has ASM’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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
