Investors are always looking for growth in small-cap stocks like Sunworks Inc (NASDAQ:SUNW), with a market cap of US$28.94M. However, an important fact which most ignore is: how financially healthy is the business? Since SUNW is loss-making right now, it’s vital to evaluate 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’d encourage you to dig deeper yourself into SUNW here.
How does SUNW’s operating cash flow stack up against its debt?
SUNW’s debt levels have fallen from US$2.33M to US$1.96M over the last 12 months , which is made up of current and long term debt. With this reduction in debt, SUNW currently has US$6.36M remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, 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. 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 SUNW’s operating efficiency ratios such as ROA here.
Does SUNW’s liquid assets cover its short-term commitments?
At the current liabilities level of US$24.12M liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.18x. For Electrical companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can SUNW service its debt comfortably?
SUNW’s level of debt is appropriate relative to its total equity, at 14.89%. SUNW is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. SUNW’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
SUNW’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 will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for SUNW’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Sunworks to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SUNW’s future growth? Take a look at our free research report of analyst consensus for SUNW’s outlook.
- Valuation: What is SUNW 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 SUNW is currently mispriced by the market.
- 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.