Is MINDBODY Inc’s (NASDAQ:MB) Balance Sheet Strong Enough To Weather A Storm?
MINDBODY Inc (NASDAQ:MB) is a small-cap stock with a market capitalization of US$1.53B. 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? Internet companies, especially ones that are currently loss-making, are inclined towards being higher risk. Evaluating financial health as part of your investment thesis is crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into MB here.
Does MB generate enough cash through operations?
MB has sustained its debt level by about US$15.45M over the last 12 months . At this stable level of debt, the current cash and short-term investment levels stands at US$85.86M , 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. For this article’s sake, I won’t be looking at this today, but you can assess some of MB’s operating efficiency ratios such as ROA here.
Can MB meet its short-term obligations with the cash in hand?
At the current liabilities level of US$20.74M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$98.70M, with a current ratio of 4.76x. Though, anything about 3x may be excessive, since MB may be leaving too much capital in low-earning investments.
Does MB face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 6.11%, MB’s debt level is relatively low. This range is considered safe as MB is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is extremely low for MB, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
MB’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for MB’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research MINDBODY to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for MB’s future growth? Take a look at our free research report of analyst consensus for MB’s outlook.
2. Valuation: What is MB 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 MB is currently mispriced by the market.
3. 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.
