What Investors Should Know About VolitionRx Limited’s (VNRX) Financial Strength
Investors are always looking for growth in small-cap stocks like VolitionRx Limited (AMEX:VNRX), with a market cap of USD $78.23M. However, an important fact which most ignore is: how financially healthy is the company? There are always disruptions which destabilize an existing industry, in which most small-cap companies are the first casualties. These factors make a basic understanding of a company’s financial position of utmost importance for a potential investor. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Check out our latest analysis for VolitionRx
How does VNRX’s operating cash flow stack up against its debt?
While failure to manage cash has been one of the major reasons behind the demise of a lot of small businesses, mismanagement comes into the light during tough situations such as an economic recession. These catastrophes does not mean the company can stop servicing its debt obligations. We can test the impact of these adverse events by looking at whether cash from its current operations can pay back its current debt obligations. VNRX’s recent operating cash flow was -4.47 times its debt within the past year. This means what VNRX can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at VNRX’s operations at this point in time.
Can VNRX pay its short-term liabilities?
What about its other commitments such as payments to suppliers and salaries to its employees? During times of unfavourable events, VNRX could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We test for VNRX’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that VNRX does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.
Can VNRX service its debt comfortably?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. In the case of VNRX, the debt-to-equity ratio is 13.47%, which means its debt level does not pose a threat to its operations right now.
Next Steps:
Are you a shareholder? Although VNRX’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Given that its financial position may change. I suggest keeping on top of market expectations for VNRX’s future growth on our free analysis platform.
Are you a potential investor? VNRX’s low-debt position gives it headroom for future growth funding in the future. Moreover, its high liquidity means the company should continue to operate smoothly in the case of adverse events. In order to build your conviction in the stock, you need to further analyse VNRX’s track record. I encourage you to continue your research by taking a look at VNRX’s past performance analysis on our free platform in order to determine for yourself whether its debt position is justified.
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.
