What Investors Should Know About Xtant Medical Holdings Inc’s (NYSEMKT:XTNT) Financial Strength
Investors are always looking for growth in small-cap stocks like Xtant Medical Holdings Inc (AMEX:XTNT), with a market cap of US$75.06M. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Medical Equipment industry, especially ones that are currently loss-making, are more likely to be higher risk. So, understanding the company’s financial health becomes essential. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I’d encourage you to dig deeper yourself into XTNT here.
Does XTNT generate enough cash through operations?
XTNT has built up its total debt levels in the last twelve months, from US$130.75M to US$138.95M , which is made up of current and long term debt. With this increase in debt, the current cash and short-term investment levels stands at US$2.86M , 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. 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 XTNT’s operating efficiency ratios such as ROA here.
Does XTNT’s liquid assets cover its short-term commitments?
With current liabilities at US$25.82M, it seems that the business has been able to meet these obligations given the level of current assets of US$39.50M, with a current ratio of 1.53x. Generally, for Medical Equipment companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does XTNT face the risk of succumbing to its debt-load?
Since total debt levels have outpaced equities, XTNT is a highly leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since XTNT is presently loss-making, 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.
Next Steps:
At its current level of cash flow coverage, XTNT has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure XTNT has company-specific issues impacting its capital structure decisions. I recommend you continue to research Xtant Medical Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for XTNT’s future growth? Take a look at our free research report of analyst consensus for XTNT’s outlook.
Historical Performance: What has XTNT’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.
