While small-cap stocks, such as LiveXLive Media Inc (NASDAQ:LIVX) with its market cap of US$282.3m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since LIVX is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. However, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into LIVX here.
How does LIVX’s operating cash flow stack up against its debt?
LIVX’s debt levels surged from US$5.0m to US$14.1m over the last 12 months , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$15.9m , 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 assess some of LIVX’s operating efficiency ratios such as ROA here.
Can LIVX meet its short-term obligations with the cash in hand?
With current liabilities at US$27.1m, the company has not been able to meet these commitments with a current assets level of US$21.0m, leading to a 0.78x current account ratio. which is under the appropriate industry ratio of 3x.
Can LIVX service its debt comfortably?
With debt reaching 44.4% of equity, LIVX may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since LIVX is currently loss-making, sustainability of its current state of operations becomes a concern. 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, LIVX has room for improvement to better cushion for events which may require debt repayment. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how LIVX has been performing in the past. I recommend you 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.
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 email@example.com.