What Investors Should Know About Sigma Labs Inc’s (NASDAQ:SGLB) Financial Strength
Investors are always looking for growth in small-cap stocks like Sigma Labs Inc (NASDAQ:SGLB), with a market cap of US$6.94M. However, an important fact which most ignore is: how financially healthy is the business? Since SGLB is loss-making right now, it’s crucial to understand 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, I know these factors are very high-level, so I suggest you dig deeper yourself into SGLB here.
Does SGLB generate an acceptable amount of cash through operations?
SGLB’s debt levels have fallen from US$561.83K to US$100.00K over the last 12 months . With this reduction in debt, SGLB’s cash and short-term investments stands at US$1.52M , ready to deploy 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. For this article’s sake, I won’t be looking at this today, but you can take a look at some of SGLB’s operating efficiency ratios such as ROA here.
Does SGLB’s liquid assets cover its short-term commitments?
With current liabilities at US$382.89K, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 6.94x. Though, anything above 3x is considered high and could mean that SGLB has too much idle capital in low-earning investments.
Is SGLB’s debt level acceptable?
With debt at 4.95% of equity, SGLB may be thought of as having low leverage. This range is considered safe as SGLB is not taking on too much debt obligation, which may be constraining for future growth. SGLB’s risk around capital structure is almost non-existent, and the company has the headroom and ability to raise debt should it need to in the future.
Next Steps:
SGLB’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for SGLB’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Sigma Labs to get a more holistic view of the stock by looking at:
Historical Performance: What has SGLB’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 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.
