Investors are always looking for growth in small-cap stocks like Fluidigm Corporation (NASDAQ:FLDM), with a market cap of US$265.09M. However, an important fact which most ignore is: how financially healthy is the business? Life Sciences companies, especially ones that are currently loss-making, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. 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 FLDM here.
Does FLDM generate an acceptable amount of cash through operations?
FLDM has sustained its debt level by about US$195.24M over the last 12 months comprising of short- and long-term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$63.14M 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 examine some of FLDM’s operating efficiency ratios such as ROA here.
Does FLDM’s liquid assets cover its short-term commitments?
With current liabilities at US$33.47M, it appears that the company has been able to meet these obligations given the level of current assets of US$94.80M, with a current ratio of 2.83x. For Life Sciences companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can FLDM service its debt comfortably?
With total debt exceeding equities, FLDM is considered a highly levered company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since FLDM is presently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
At its current level of cash flow coverage, FLDM has room for improvement to better cushion for events which may require debt repayment. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure FLDM has company-specific issues impacting its capital structure decisions. I recommend you continue to research Fluidigm to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for FLDM’s future growth? Take a look at our free research report of analyst consensus for FLDM’s outlook.
- 2. Historical Performance: What has FLDM’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.
- 3. 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.