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Corindus Vascular Robotics, Inc. (NYSEMKT:CVRS) is a small-cap stock with a market capitalization of US$620m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Since CVRS is loss-making right now, it’s vital to assess the current state of its operations and pathway to profitability. Let's work through some financial health checks you may wish to consider if you're interested in this stock. However, this is just a partial view of the stock, and I suggest you dig deeper yourself into CVRS here.
CVRS’s Debt (And Cash Flows)
CVRS's debt levels surged from US$12m to US$15m over the last 12 months , which includes long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$38m , ready to be used for running the business. Moving on, operating cash flow was negative over the last twelve months. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of CVRS’s operating efficiency ratios such as ROA here.
Can CVRS pay its short-term liabilities?
With current liabilities at US$9.4m, the company has been able to meet these obligations given the level of current assets of US$45m, with a current ratio of 4.72x. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors.
Does CVRS face the risk of succumbing to its debt-load?
CVRS is a relatively highly levered company with a debt-to-equity of 57%. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. Though, since CVRS is currently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Although CVRS’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. I admit this is a fairly basic analysis for CVRS's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Corindus Vascular Robotics to get a more holistic view of the small-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CVRS’s future growth? Take a look at our free research report of analyst consensus for CVRS’s outlook.
- Historical Performance: What has CVRS'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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.