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What Investors Should Know About TVA Group Inc’s (TSE:TVA.B) Financial Strength

Investors are always looking for growth in small-cap stocks like TVA Group Inc (TSE:TVA.B), with a market cap of CA$98.9m. However, an important fact which most ignore is: how financially healthy is the business? Since TVA.B is loss-making right now, it’s vital 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, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into TVA.B here.

Does TVA.B produce enough cash relative to debt?

Over the past year, TVA.B has reduced its debt from CA$79.9m to CA$57.9m , which comprises of short- and long-term debt. With this reduction in debt, TVA.B’s cash and short-term investments stands at CA$5.4m , ready to deploy into the business. Moreover, TVA.B has generated cash from operations of CA$48.8m over the same time period, resulting in an operating cash to total debt ratio of 84.3%, signalling that TVA.B’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for loss making companies as traditional metrics such as return on asset (ROA) requires a positive net income. In TVA.B’s case, it is able to generate 0.84x cash from its debt capital.

Can TVA.B pay its short-term liabilities?

With current liabilities at CA$201.7m, it seems that the business has been able to meet these commitments with a current assets level of CA$214.7m, leading to a 1.06x current account ratio. For Media companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

TSX:TVA.B Historical Debt September 26th 18
TSX:TVA.B Historical Debt September 26th 18

Does TVA.B face the risk of succumbing to its debt-load?

With a debt-to-equity ratio of 23.3%, TVA.B’s debt level may be seen as prudent. TVA.B is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for TVA.B, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

TVA.B has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how TVA.B has been performing in the past. You should continue to research TVA Group to get a more holistic view of the stock by looking at:

  1. Valuation: What is TVA.B 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 TVA.B is currently mispriced by the market.

  2. Historical Performance: What has TVA.B’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 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 editorial-team@simplywallst.com.

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