Micron Solutions Inc (AMEX:MICR) is a small-cap stock with a market capitalization of US$9.96M. 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? Healthcare Services companies, in particular ones that run negative earnings, are more likely to be higher risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into MICR here.
How does MICR’s operating cash flow stack up against its debt?
Over the past year, MICR has ramped up its debt from US$4.78M to US$6.58M , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$606.99K , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, 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 MICR’s operating efficiency ratios such as ROA here.
Does MICR’s liquid assets cover its short-term commitments?
With current liabilities at US$4.88M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.52x. Generally, for Healthcare Services companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can MICR service its debt comfortably?
MICR is a highly-leveraged company with debt exceeding equity by over 100%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since MICR 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.
MICR’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for MICR’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Micron Solutions to get a better picture of the stock by looking at:
- Valuation: What is MICR 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 MICR is currently mispriced by the market.
- Historical Performance: What has MICR’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.