Beasley Broadcast Group Inc (NASDAQ:BBGI): Time For A Financial Health Check
Investors are always looking for growth in small-cap stocks like Beasley Broadcast Group Inc (NASDAQ:BBGI), with a market cap of $398.70M. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. Though, I know these factors are very high-level, so I recommend you dig deeper yourself into BBGI here.
Does BBGI generate enough cash through operations?
Over the past year, BBGI has ramped up its debt from $87.9M to $254.4M , which is made up of current and long term debt. With this growth in debt, BBGI currently has $20.3M remaining in cash and short-term investments , ready to deploy into the business. Additionally, BBGI has produced cash from operations of $17.2M over the same time period, resulting in an operating cash to total debt ratio of 6.74%, signalling that BBGI’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In BBGI’s case, it is able to generate 0.07x cash from its debt capital.
Can BBGI pay its short-term liabilities?
Looking at BBGI’s most recent $33.9M liabilities, the company has been able to meet these obligations given the level of current assets of $103.4M, with a current ratio of 3.05x. However, a ratio greater than 3x may be considered as too high, as BBGI could be holding too much capital in a low-return investment environment.
Is BBGI’s level of debt at an acceptable level?
With debt reaching 95.37% of equity, BBGI may be thought of as relatively highly levered. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In BBGI’s case, the ratio of 1.91x suggests that interest is not strongly covered, which means that lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.
Next Steps:
Are you a shareholder? At its current level of cash flow coverage, BBGI has room for improvement to better cushion for events which may require debt repayment. Though, its high liquidity means the company should continue to operate smoothly in the case of adverse events. Given that BBGI’s financial situation may change. I suggest keeping abreast of market expectations for BBGI’s future growth on our free analysis platform.
Are you a potential investor? With a high level of debt on its balance sheet, BBGI could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for BBGI to increase its operational efficiency. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I encourage you to continue your research by taking a look at BBGI’s past performance analysis on our free platform to figure out BBGI’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.
