What does Toachi Mining Inc’s (CVE:TIM) Balance Sheet Tell Us About Its Future?
While small-cap stocks, such as Toachi Mining Inc (TSXV:TIM) with its market cap of CA$9.82M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since TIM is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into TIM here.
Does TIM generate an acceptable amount of cash through operations?
In the previous 12 months, TIM’s rose by about CA$20.64K . With this increase in debt, TIM’s cash and short-term investments stands at CA$4.86M for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of TIM’s operating efficiency ratios such as ROA here.
Can TIM pay its short-term liabilities?
At the current liabilities level of CA$455.90K liabilities, it seems that the business has been able to meet these obligations given the level of current assets of CA$4.90M, with a current ratio of 10.75x. Though, anything about 3x may be excessive, since TIM may be leaving too much capital in low-earning investments.
Is TIM’s debt level acceptable?
With a debt-to-equity ratio of 21.10%, TIM’s debt level may be seen as prudent. This range is considered safe as TIM is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with TIM, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
TIM’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. 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 TIM has been performing in the past. You should continue to research Toachi Mining to get a better picture of the stock by looking at:
1. Historical Performance: What has TIM’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.
2. 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.
