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How Financially Strong Is Champions Oncology Inc (NASDAQ:CSBR)?

Veer Mallick

Investors are always looking for growth in small-cap stocks like Champions Oncology Inc (NASDAQ:CSBR), with a market cap of US$39.12M. However, an important fact which most ignore is: how financially healthy is the business? Life Sciences companies, in particular ones that run negative earnings, are more likely to be higher risk. Assessing first and foremost the financial health is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into CSBR here.

Does CSBR generate an acceptable amount of cash through operations?

In the previous 12 months, CSBR’s rose by about US$63.00K . With this ramp up in debt, the current cash and short-term investment levels stands at US$3.30M for investing 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. For this article’s sake, I won’t be looking at this today, but you can examine some of CSBR’s operating efficiency ratios such as ROA here.

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

Looking at CSBR’s most recent US$7.45M liabilities, it appears that the company has not been able to meet these commitments with a current assets level of US$5.87M, leading to a 0.79x current account ratio. which is under the appropriate industry ratio of 3x.

NasdaqCM:CSBR Historical Debt Feb 28th 18
NasdaqCM:CSBR Historical Debt Feb 28th 18

Does CSBR face the risk of succumbing to its debt-load?

With debt at 14.75% of equity, CSBR may be thought of as appropriately levered. This range is considered safe as CSBR is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with CSBR, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

CSBR’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. Furthermore, its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how CSBR has been performing in the past. You should continue to research Champions Oncology to get a better picture 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.