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Is Computer Task Group Incorporated’s (NASDAQ:CTG) Balance Sheet A Threat To Its Future?

Investors are always looking for growth in small-cap stocks like Computer Task Group Incorporated (NASDAQ:CTG), with a market cap of US$132.87M. However, an important fact which most ignore is: how financially healthy is the business? IT companies, even ones that are profitable, tend to be high risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into CTG here.

Does CTG generate an acceptable amount of cash through operations?

Over the past year, CTG has reduced its debt from US$4.73M to US$4.44M , which is made up of current and long term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$11.17M for investing into the business. Moreover, CTG has generated US$9.23M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 208.12%, signalling that CTG’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In CTG’s case, it is able to generate 2.08x cash from its debt capital.

Can CTG pay its short-term liabilities?

With current liabilities at US$32.74M, the company has been able to meet these commitments with a current assets level of US$83.53M, leading to a 2.55x current account ratio. Usually, for IT 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.

NasdaqGS:CTG Historical Debt Apr 19th 18
NasdaqGS:CTG Historical Debt Apr 19th 18

Can CTG service its debt comfortably?

CTG’s level of debt is low relative to its total equity, at 5.64%. CTG is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether CTG is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In CTG’s, case, the ratio of 17.13x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving CTG ample headroom to grow its debt facilities.

Next Steps:

CTG’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure CTG has company-specific issues impacting its capital structure decisions. You should continue to research Computer Task Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CTG’s future growth? Take a look at our free research report of analyst consensus for CTG’s outlook.

  2. Valuation: What is CTG worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CTG is currently mispriced by the market.

  3. 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.

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