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What does Sparton Resources Inc’s (CVE:SRI) Balance Sheet Tell Us About Its Future?

While small-cap stocks, such as Sparton Resources Inc (TSXV:SRI) with its market cap of CA$9.64M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Oil and Gas companies, even ones that are profitable, are more likely to be higher risk. So, understanding the company’s financial health becomes vital. I believe these basic checks tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into SRI here.

Does SRI generate an acceptable amount of cash through operations?

Over the past year, SRI has ramped up its debt from CA$536.11K to CA$719.55K , which is mainly comprised of near term debt. With this increase in debt, SRI’s cash and short-term investments stands at CA$496.95K , ready to deploy into the business. Additionally, SRI has generated cash from operations of CA$392.63K over the same time period, leading to an operating cash to total debt ratio of 54.57%, indicating that SRI’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In SRI’s case, it is able to generate 0.55x cash from its debt capital.

Does SRI’s liquid assets cover its short-term commitments?

At the current liabilities level of CA$4.09M liabilities, it seems that the business has not been able to meet these commitments with a current assets level of CA$2.74M, leading to a 0.67x current account ratio. which is under the appropriate industry ratio of 3x.

TSXV:SRI Historical Debt Mar 1st 18
TSXV:SRI Historical Debt Mar 1st 18

Is SRI’s debt level acceptable?

With debt at 15.33% of equity, SRI may be thought of as appropriately levered. SRI is not taking on too much debt commitment, which may be constraining for future growth.

Next Steps:

SRI’s high cash coverage and conservative debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. But, as shareholders, you should try and determine whether this level of debt is justified for SRI, especially when liquidity may also be an issue. This is only a rough assessment of financial health, and I’m sure SRI has company-specific issues impacting its capital structure decisions. You should continue to research Sparton Resources 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.

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