Investors are always looking for growth in small-cap stocks like Fluent Inc (NASDAQ:FLNT), with a market cap of US$225.68m. However, an important fact which most ignore is: how financially healthy is the business? Given that FLNT is not presently profitable, it’s crucial to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into FLNT here.
How much cash does FLNT generate through its operations?
FLNT’s debt levels surged from US$50.01m to US$62.96m over the last 12 months , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$16.63m , ready to deploy into the business. Additionally, FLNT has produced cash from operations of US$2.35m in the last twelve months, leading to an operating cash to total debt ratio of 3.74%, indicating that FLNT’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In FLNT’s case, it is able to generate 0.037x cash from its debt capital.
Can FLNT meet its short-term obligations with the cash in hand?
With current liabilities at US$32.78m, the company has been able to meet these obligations given the level of current assets of US$56.98m, with a current ratio of 1.74x. 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 FLNT’s debt level acceptable?
With a debt-to-equity ratio of 33.44%, FLNT’s debt level may be seen as prudent. This range is considered safe as FLNT is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with FLNT, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Although FLNT’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. This is only a rough assessment of financial health, and I’m sure FLNT has company-specific issues impacting its capital structure decisions. You should continue to research Fluent to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FLNT’s future growth? Take a look at our free research report of analyst consensus for FLNT’s outlook.
- Valuation: What is FLNT 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 FLNT 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.