What does AngioDynamics Inc’s (NASDAQ:ANGO) Balance Sheet Tell Us About Its Future?
While small-cap stocks, such as AngioDynamics Inc (NASDAQ:ANGO) with its market cap of US$806.0m, 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, even ones that are profitable, are inclined towards being higher risk. Assessing first and foremost the financial health is vital. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into ANGO here.
How much cash does ANGO generate through its operations?
ANGO’s debt level has been constant at around US$90.4m over the previous year – this includes both the current and long-term debt. At this current level of debt, ANGO currently has US$26.1m remaining in cash and short-term investments for investing into the business. Additionally, ANGO has produced US$29.4m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 32.5%, signalling that ANGO’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In ANGO’s case, it is able to generate 0.32x cash from its debt capital.
Does ANGO’s liquid assets cover its short-term commitments?
Looking at ANGO’s most recent US$45.8m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.64x. Usually, for Medical Equipment companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can ANGO service its debt comfortably?
With debt at 16.6% of equity, ANGO may be thought of as appropriately levered. This range is considered safe as ANGO is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether ANGO 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 ANGO’s, case, the ratio of 8.53x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Next Steps:
ANGO’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for ANGO’s financial health. Other important fundamentals need to be considered alongside. You should continue to research AngioDynamics to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ANGO’s future growth? Take a look at our free research report of analyst consensus for ANGO’s outlook.
Valuation: What is ANGO 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 ANGO is currently mispriced by the market.
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 editorial-team@simplywallst.com.
