Amber Road Inc (NYSE:AMBR) is a small-cap stock with a market capitalization of US$253.00M. 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? Internet companies, in particular ones that run negative earnings, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. 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 AMBR here.
How does AMBR’s operating cash flow stack up against its debt?
AMBR’s debt level has been constant at around US$22.37M over the previous year – this includes both the current and long-term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$9.36M 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 assess some of AMBR’s operating efficiency ratios such as ROA here.
Does AMBR’s liquid assets cover its short-term commitments?
With current liabilities at US$50.12M, it seems that the business has not been able to meet these commitments with a current assets level of US$33.32M, leading to a 0.66x current account ratio. which is under the appropriate industry ratio of 3x.
Can AMBR service its debt comfortably?
With a debt-to-equity ratio of 87.72%, AMBR can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. But since AMBR 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.
AMBR’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for AMBR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Amber Road to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AMBR’s future growth? Take a look at our free research report of analyst consensus for AMBR’s outlook.
- Valuation: What is AMBR 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 AMBR is currently mispriced by the market.
- 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.