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Check-Cap Ltd (CHEK): The Yield That Matters The Most

Collin Greene

Check-Cap Ltd (NASDAQ:CHEK) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. This difference directly flows down to how much the stock is worth. Operating in the healthcare equipment industry, CHEK is currently valued at USD$17.52M. I will take you through CHEK’s cash flow health and the risk-return concept based on the stock’s cash flow yield, using the most recent financial data. This will help you think about CHEK from a cash perspective, which is a crucial factor to investing. View our latest analysis for Check-Cap

What is CHEK’s cash yield?

CHEK generates cash through its day-to-day business, which needs to be reinvested into the company in order for it to continue operating. What remains after this expenditure, is known as its free cash flow, or FCF, for short. I will be analysing CHEK’s FCF by looking at its FCF yield and its operating cash flow growth. The yield will tell us whether the stock is generating enough cash to compensate for the risk investors take on by holding a single stock, which I will compare to the market index. The growth will proxy for sustainability levels of this cash generation.

Free Cash Flow = Operating Cash Flows – Net Capital Expenditure

Free Cash Flow Yield = Free Cash Flow / Enterprise Value

where Enterprise Value = Market Capitalisation + Net Debt

Despite its positive operating cash flow, after accounting for capital expenses required to run the business, CHEK is not able to generate positive FCF, leading to a negative FCF yield – not very useful for interpretation!

NasdaqCM:CHEK Net Worth Dec 6th 17

What’s the cash flow outlook for CHEK?

Does CHEK’s future look brighter in terms of its ability to generate higher operating cash flows? This can be estimated by examining the trend of the company’s operating cash flow going forward. In this case, analysts have only forecasted operating cash growth for one year, which makes it difficult to assess sustainability. However, just looking at the upcoming year outlook, expected growth for CHEK’s operating cash is negative. This is unfavourable to its future outlook, especially if capital expenditure heads the opposite direction.

What this means for you:

So, what is CHEK actually worth? At the share price of $0.91, find out whether it is currently undervalued at a glance in our FREE easy-to-understand infographics report. Not interested in CHEK anymore? How about checking out hidden opportunities in high-growth and undervalued 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.