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Creative Realities, Inc. (NASDAQ:CREX) is a small-cap stock with a market capitalization of US$22m. 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 CREX is loss-making right now, it’s essential to evaluate 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 CREX here.
CREX’s Debt (And Cash Flows)
CREX has sustained its debt level by about US$5.5m over the last 12 months which accounts for long term debt. At this current level of debt, the current cash and short-term investment levels stands at US$2.7m to keep the business going. We note it produced negative cash flow over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can examine some of CREX’s operating efficiency ratios such as ROA here.
Can CREX pay its short-term liabilities?
At the current liabilities level of US$15m, it seems that the business arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.82x. The current ratio is calculated by dividing current assets by current liabilities.
Does CREX face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 33%, CREX's debt level may be seen as prudent. CREX is not taking on too much debt commitment, which may be constraining for future growth. Investors' risk associated with debt is very low with CREX, and the company has plenty of headroom and ability to raise debt should it need to in the future.
CREX’s debt level is appropriate for a company its size. Furthermore, it is able to generate sufficient cash flow coverage, meaning it is able to put its debt in good use. But, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for CREX's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Creative Realities to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CREX’s future growth? Take a look at our free research report of analyst consensus for CREX’s outlook.
- Historical Performance: What has CREX'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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.