VOXX International Corporation (NASDAQ:VOXX) is a small-cap stock with a market capitalization of US$131.91m. 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? So, understanding the company’s financial health becomes essential, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I suggest you dig deeper yourself into VOXX here.
Does VOXX produce enough cash relative to debt?
Over the past year, VOXX has reduced its debt from US$108.19m to US$16.94m – this includes both the current and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at US$51.74m 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. 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 VOXX’s operating efficiency ratios such as ROA here.
Does VOXX’s liquid assets cover its short-term commitments?
Looking at VOXX’s most recent US$95.39m liabilities, the company has been able to meet these commitments with a current assets level of US$265.86m, leading to a 2.79x current account ratio. Usually, for Auto Components companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can VOXX service its debt comfortably?
With a debt-to-equity ratio of 3.76%, VOXX’s debt level is relatively low. VOXX is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
VOXX’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 will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for VOXX’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research VOXX International to get a better picture of the stock by looking at:
- Valuation: What is VOXX 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 VOXX is currently mispriced by the market.
- Historical Performance: What has VOXX’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 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.