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Is Hudson Technologies Inc’s (NASDAQ:HDSN) Balance Sheet Strong Enough To Weather A Storm?

Investors are always looking for growth in small-cap stocks like Hudson Technologies Inc (NASDAQ:HDSN), with a market cap of US$230.43M. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. However, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into HDSN here.

Does HDSN generate enough cash through operations?

HDSN has built up its total debt levels in the last twelve months, from US$351.00K to US$167.36M – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$5.00M for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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 take a look at some of HDSN’s operating efficiency ratios such as ROA here.

Can HDSN pay its short-term liabilities?

With current liabilities at US$95.42M, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.19x. For Commercial Services companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.

NasdaqCM:HDSN Historical Debt Mar 12th 18
NasdaqCM:HDSN Historical Debt Mar 12th 18

Is HDSN’s debt level acceptable?

HDSN is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether HDSN is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In HDSN’s, case, the ratio of 4.79x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as HDSN’s high interest coverage is seen as responsible and safe practice.

Next Steps:

HDSN’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, 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 HDSN’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Hudson Technologies to get a more holistic view 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.

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