While small-cap stocks, such as Bovie Medical Corporation (NYSEMKT:BVX) with its market cap of US$213m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Medical Equipment companies, especially ones that are currently loss-making, tend to be high risk. Evaluating financial health as part of your investment thesis is essential. I believe these basic checks tell most of the story you need to know. However, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into BVX here.
How much cash does BVX generate through its operations?
Over the past year, BVX has reduced its debt from US$3m to US$3m – this includes both the current and long-term debt. With this debt payback, BVX’s cash and short-term investments stands at US$8m , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of BVX’s operating efficiency ratios such as ROA here.
Can BVX pay its short-term liabilities?
Looking at BVX’s most recent US$6m liabilities, the company has been able to meet these commitments with a current assets level of US$22m, leading to a 3.56x current account ratio. Having said that, anything above 3x may be considered excessive by some investors. They might argue BVX is leaving too much capital in low-earning investments.
Does BVX face the risk of succumbing to its debt-load?
With debt at 13% of equity, BVX may be thought of as appropriately levered. This range is considered safe as BVX is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for BVX, and the company also has the ability and headroom to increase debt if needed going forward.
Although BVX’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 proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BVX’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Bovie Medical to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BVX’s future growth? Take a look at our free research report of analyst consensus for BVX’s outlook.
- Historical Performance: What has BVX’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 past 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. For errors that warrant correction please contact the editor at email@example.com.