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Investors are always looking for growth in small-cap stocks like Marathon Patent Group Inc (NASDAQ:MARA), with a market cap of US$26.87M. However, an important fact which most ignore is: how financially healthy is the business? Given that MARA is not presently profitable, it’s essential to evaluate the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into MARA here.
How does MARA’s operating cash flow stack up against its debt?
MARA has shrunken its total debt levels in the last twelve months, from US$17.83M to US$1.76M – this includes both the current and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$14.95M for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of MARA’s operating efficiency ratios such as ROA here.
Can MARA meet its short-term obligations with the cash in hand?
Looking at MARA’s most recent US$7.67M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.96x. For Professional Services companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is MARA’s debt level acceptable?
With a debt-to-equity ratio of 23.88%, MARA’s debt level may be seen as prudent. MARA is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for MARA, and the company also has the ability and headroom to increase debt if needed going forward.
Although MARA’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how MARA has been performing in the past. You should continue to research Marathon Patent Group to get a better picture of the stock by looking at:
Historical Performance: What has MARA’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.
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.