Matomy Media Group Ltd. (LON:MTMY) is a small-cap stock with a market capitalization of UK£6.0m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Since MTMY is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into MTMY here.
How much cash does MTMY generate through its operations?
Over the past year, MTMY has ramped up its debt from US$28m to US$40m , which includes long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$14m for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can examine some of MTMY’s operating efficiency ratios such as ROA here.
Does MTMY’s liquid assets cover its short-term commitments?
With current liabilities at US$61m, the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.74x.
Does MTMY face the risk of succumbing to its debt-load?
MTMY is a relatively highly levered company with a debt-to-equity of 79%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since MTMY is currently 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.
Although MTMY’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for MTMY’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Matomy Media Group to get a more holistic view of the stock by looking at:
Valuation: What is MTMY 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 MTMY is currently mispriced by the market.
Historical Performance: What has MTMY’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.
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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.