While small-cap stocks, such as iCAD Inc (NASDAQ:ICAD) with its market cap of USD $58.45M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the health care technology industry, especially ones that are currently loss-making, are inclined towards being higher risk. So, understanding the company’s financial health becomes vital. I believe these three small calculations tell most of the story you need to know. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into ICAD here.
How does ICAD’s operating cash flow stack up against its debt?
ICAD’s debt levels have fallen from $1M to $0M over the last 12 months – this includes both the current and long-term debt. With this debt repayment, ICAD currently has $9M remaining in cash and short-term investments for investing into the business. However, 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 ICAD’s operating efficiency ratios such as ROA here.
Can ICAD meet its short-term obligations with the cash in hand?
With current liabilities at $13M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.55x. Usually, for health care technology companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does ICAD face the risk of succumbing to its debt-load?
With debt at 33.18% of equity, ICAD may be thought of as appropriately levered. ICAD is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for ICAD, and the company also has the ability and headroom to increase debt if needed going forward.
Are you a shareholder? Although ICAD’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. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may be different. I recommend researching market expectations for ICAD’s future growth on our free analysis platform.
Are you a potential investor? iCAD currently has financial flexibility to ramp up growth in the future. In addition, its high liquidity means the company should continue to operate smoothly in the case of adverse events. To gain more confidence in the stock, you need to also analyse the company’s track record. You should continue your analysis by taking a look at ICAD’s past performance analysis on our free platform in order to determine for yourself whether its debt position is justified.
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.