Nixu Oyj (HLSE:NIXU) is a small-cap stock with a market capitalization of €83.86M. 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? IT companies, especially ones that are currently loss-making, tend to be high risk. So, understanding the company’s financial health becomes vital. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I recommend you dig deeper yourself into NIXU here.
Does NIXU generate enough cash through operations?
Over the past year, NIXU has ramped up its debt from €3.48M to €8.48M , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at €11.86M 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. For this article’s sake, I won’t be looking at this today, but you can assess some of NIXU’s operating efficiency ratios such as ROA here.
Can NIXU pay its short-term liabilities?
With current liabilities at €17.31M, the company has been able to meet these commitments with a current assets level of €23.73M, leading to a 1.37x current account ratio. Usually, for IT companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can NIXU service its debt comfortably?
NIXU is a relatively highly levered company with a debt-to-equity of 44.87%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since NIXU is currently unprofitable, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
NIXU’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 NIXU has been performing in the past. You should continue to research Nixu Oyj to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for NIXU’s future growth? Take a look at our free research report of analyst consensus for NIXU’s outlook.
- 2. Valuation: What is NIXU 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 NIXU is currently mispriced by the market.
- 3. 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.