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What does Dover Motorsports Inc’s (NYSE:DVD) Balance Sheet Tell Us About Its Future?

While small-cap stocks, such as Dover Motorsports Inc (NYSE:DVD) with its market cap of $74.55M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. So, understanding the company’s financial health becomes essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. 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 DVD here.

How does DVD’s operating cash flow stack up against its debt?

DVD has shrunken its total debt levels in the last twelve months, from $3.8M to $3.2M , which comprises of short- and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at under $10K, which is concerning. But on the other hand, DVD has produced $5.8M in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 180.03%, indicating that its 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 DVD’s case, it is able to generate 1.8x cash from its debt capital.

Can DVD pay its short-term liabilities?

At the current liabilities level of $4.4M liabilities, it seems that the business has been able to meet these commitments with a current assets level of $4.6M, leading to a 1.06x current account ratio. Generally, for Hospitality companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

NYSE:DVD Historical Debt Feb 3rd 18
NYSE:DVD Historical Debt Feb 3rd 18

Does DVD face the risk of succumbing to its debt-load?

DVD’s level of debt is low relative to its total equity, at 5.47%. This range is considered safe as DVD is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether DVD 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 DVD’s, case, the ratio of 42x suggests that interest is comfortably 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:

DVD’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 will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how DVD has been performing in the past. I recommend you continue to research Dover Motorsports to get a better picture 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.

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