Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
LiveXLive Media, Inc. (NASDAQ:LIVX) is a small-cap stock with a market capitalization of US$249m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Since LIVX is loss-making right now, it’s essential to understand the current state of its operations and pathway to profitability. The following basic checks can help you get a picture of the company's balance sheet strength. Nevertheless, potential investors would need to take a closer look, and I’d encourage you to dig deeper yourself into LIVX here.
Does LIVX Produce Much Cash Relative To Its Debt?
LIVX has built up its total debt levels in the last twelve months, from US$8.6m to US$15m , which includes long-term debt. With this growth in debt, LIVX currently has US$14m remaining in cash and short-term investments to keep the business going. We note it produced negative cash flow over the last twelve months. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of LIVX’s operating efficiency ratios such as ROA here.
Can LIVX pay its short-term liabilities?
Looking at LIVX’s US$37m in current liabilities, the company may not be able to easily meet these obligations given the level of current assets of US$19m, with a current ratio of 0.52x. The current ratio is calculated by dividing current assets by current liabilities.
Is LIVX’s debt level acceptable?
With a debt-to-equity ratio of 99%, LIVX can be considered as an above-average leveraged company. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. However, since LIVX is currently 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.
Although LIVX’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. However, 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 LIVX has been performing in the past. You should continue to research LiveXLive Media to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LIVX’s future growth? Take a look at our free research report of analyst consensus for LIVX’s outlook.
- Valuation: What is LIVX 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 LIVX 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.