While small-cap stocks, such as Bridgeline Digital Inc (NASDAQ:BLIN) with its market cap of US$6.06M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Internet companies, especially ones that are currently loss-making, tend to be high risk. So, understanding the company’s financial health becomes crucial. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into BLIN here.
How does BLIN’s operating cash flow stack up against its debt?
BLIN’s debt levels surged from US$2.16M to US$2.50M over the last 12 months , which is made up of current and long term debt. With this increase in debt, BLIN currently has US$748.00K remaining in cash and short-term investments for investing 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 examine some of BLIN’s operating efficiency ratios such as ROA here.
Can BLIN pay its short-term liabilities?
Looking at BLIN’s most recent US$3.63M liabilities, the company has been able to meet these commitments with a current assets level of US$4.13M, leading to a 1.14x current account ratio. Usually, for Internet companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can BLIN service its debt comfortably?
BLIN’s level of debt is appropriate relative to its total equity, at 26.05%. BLIN is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. BLIN’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
BLIN’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how BLIN has been performing in the past. I suggest you continue to research Bridgeline Digital to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BLIN’s future growth? Take a look at our free research report of analyst consensus for BLIN’s outlook.
- Historical Performance: What has BLIN’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 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.