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Ballantyne Strong Inc (NYSEMKT:BTN) is a small-cap stock with a market capitalization of US$57.1m. 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? Since BTN 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. However, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into BTN here.
How does BTN’s operating cash flow stack up against its debt?
BTN’s debt levels surged from US$4.5m to US$11.1m over the last 12 months , which comprises of short- and long-term debt. With this rise in debt, BTN currently has US$6.8m remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, 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 BTN’s operating efficiency ratios such as ROA here.
Does BTN’s liquid assets cover its short-term commitments?
With current liabilities at US$13.8m, it seems that the business has been able to meet these commitments with a current assets level of US$23.5m, leading to a 1.7x current account ratio. Generally, for Media companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is BTN’s debt level acceptable?
With a debt-to-equity ratio of 33.5%, BTN’s debt level may be seen as prudent. This range is considered safe as BTN is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with BTN, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Although BTN’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 will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how BTN has been performing in the past. I recommend you continue to research Ballantyne Strong to get a better picture of the stock by looking at:
Valuation: What is BTN 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 BTN is currently mispriced by the market.
Historical Performance: What has BTN’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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.