Investors are always looking for growth in small-cap stocks like Voyageur Minerals Ltd (TSXV:VM), with a market cap of CA$3.27M. However, an important fact which most ignore is: how financially healthy is the business? Given that VM is not presently profitable, it’s vital 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. Though, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into VM here.
Does VM generate an acceptable amount of cash through operations?
In the previous 12 months, VM’s rose by about CA$49.87K made up of predominantly near term debt. With this ramp up in debt, the current cash and short-term investment levels stands at CA$17.05K for investing 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of VM’s operating efficiency ratios such as ROA here.
Can VM meet its short-term obligations with the cash in hand?
Looking at VM’s most recent CA$588.86K liabilities, the company is not able to meet these obligations given the level of current assets of CA$92.34K, with a current ratio of 0.16x below the prudent level of 3x.
Is VM’s debt level acceptable?
VM is a relatively highly levered company with a debt-to-equity of 63.16%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since VM is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
At its current level of cash flow coverage, VM has room for improvement to better cushion for events which may require debt repayment. Furthermore, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. Keep in mind I haven’t considered other factors such as how VM has been performing in the past. I recommend you continue to research Voyageur Minerals to get a better picture of the stock by looking at:
- Historical Performance: What has VM’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.