While small-cap stocks, such as Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) with its market cap of US$103m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Medical Equipment companies, especially ones that are currently loss-making, are inclined towards being higher risk. Assessing first and foremost the financial health is essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, this commentary is still very high-level, so I suggest you dig deeper yourself into EKSO here.
How does EKSO’s operating cash flow stack up against its debt?
EKSO has shrunken its total debt levels in the last twelve months, from US$7.0m to US$5.6m – this includes long-term debt. With this reduction in debt, EKSO’s cash and short-term investments stands at US$13m for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can assess some of EKSO’s operating efficiency ratios such as ROA here.
Can EKSO meet its short-term obligations with the cash in hand?
At the current liabilities level of US$10m, it appears that the company has been able to meet these obligations given the level of current assets of US$20m, with a current ratio of 1.95x. Usually, for Medical Equipment companies, this is a suitable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Can EKSO service its debt comfortably?
EKSO is a highly-leveraged company with debt exceeding equity by over 100%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. But since EKSO is currently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Although EKSO’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. I admit this is a fairly basic analysis for EKSO’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Ekso Bionics Holdings to get a more holistic view of the small-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EKSO’s future growth? Take a look at our free research report of analyst consensus for EKSO’s outlook.
- Historical Performance: What has EKSO’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.
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