What Investors Should Know About ConforMIS Inc’s (NASDAQ:CFMS) Financial Strength
Investors are always looking for growth in small-cap stocks like ConforMIS Inc (NASDAQ:CFMS), with a market cap of $106.44M. However, an important fact which most ignore is: how financially healthy is the business? Medical Equipment companies, in particular ones that run negative earnings, tend to be high risk. So, understanding the company’s financial health becomes vital. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into CFMS here.
Does CFMS generate an acceptable amount of cash through operations?
CFMS has shrunken its total debt levels in the last twelve months, from $0.5M to $0.0M , which is made up of current and long term debt. With this reduction in debt, CFMS currently has $65.5M remaining in cash and short-term investments , ready to deploy 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 examine some of CFMS’s operating efficiency ratios such as ROA here.
Does CFMS’s liquid assets cover its short-term commitments?
With current liabilities at $14.3M liabilities, it appears that the company has been able to meet these commitments with a current assets level of $95.8M, leading to a 6.72x current account ratio. However, anything above 3x is considered high and could mean that CFMS has too much idle capital in low-earning investments.
Can CFMS service its debt comfortably?
With a debt-to-equity ratio of 52.09%, CFMS can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since CFMS 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.
Next Steps:
Are you a shareholder? CFMS’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. Given that CFMS’s financial situation may change. I suggest keeping abreast of market expectations for CFMS’s future growth on our free analysis platform.
Are you a potential investor? Although short-term liquidity isn’t a concern, CFMS’s large debt ratio on top of poor cash coverage may not be what you’re after in an investment. But, keep in mind that this is a point-in-time analysis, and today’s performance may not be representative of CFMS’s track record. I encourage you to continue your research by taking a look at CFMS’s past performance analysis on our free platform to conclude on CFMS’s financial health.
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.
