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What does CTI Industries Corporation’s (NASDAQ:CTIB) Balance Sheet Tell Us About Its Future?

Ashwin Virk

CTI Industries Corporation (NASDAQ:CTIB) is a small-cap stock with a market capitalization of US$14.02M. 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? Companies operating in the Consumer Durables industry facing headwinds from current disruption, especially ones that are currently loss-making, are more likely to be higher risk. Assessing first and foremost the financial health is crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, since I only look at basic financial figures, I suggest you dig deeper yourself into CTIB here.

Does CTIB generate an acceptable amount of cash through operations?

CTIB’s debt levels surged from US$20.14M to US$21.42M over the last 12 months , which is made up of current and long term debt. With this rise in debt, CTIB’s cash and short-term investments stands at US$181.03K , ready to deploy into the business. Moreover, CTIB has produced US$1.26M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 5.88%, indicating that CTIB’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires positive earnings. In CTIB’s case, it is able to generate 0.059x cash from its debt capital.

Can CTIB meet its short-term obligations with the cash in hand?

With current liabilities at US$22.66M, it appears that the company has been able to meet these obligations given the level of current assets of US$32.29M, with a current ratio of 1.42x. Generally, for Consumer Durables companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.

NasdaqCM:CTIB Historical Debt Apr 17th 18

Can CTIB service its debt comfortably?

With total debt exceeding equities, CTIB is considered a highly levered company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since CTIB 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.

Next Steps:

CTIB’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how CTIB has been performing in the past. I recommend you continue to research CTI Industries to get a more holistic view of the stock by looking at:


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.