While small-cap stocks, such as The Liberty Braves Group (NASDAQ:BATR.K) with its market cap of US$1.12B, 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 BATR.K is loss-making right now, it’s vital to evaluate the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into BATR.K here.
Does BATR.K generate enough cash through operations?
BATR.K’s debt levels surged from US$139.00M to US$328.00M over the last 12 months , which comprises of short- and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$107.00M , ready to deploy into the business. On top of this, BATR.K has generated cash from operations of US$89.00M over the same time period, leading to an operating cash to total debt ratio of 27.13%, meaning that BATR.K’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for loss making companies since metrics such as return on asset (ROA) requires positive earnings. In BATR.K’s case, it is able to generate 0.27x cash from its debt capital.
Can BATR.K pay its short-term liabilities?
Looking at BATR.K’s most recent US$168.00M liabilities, the company is not able to meet these obligations given the level of current assets of US$139.00M, with a current ratio of 0.83x below the prudent level of 3x.
Does BATR.K face the risk of succumbing to its debt-load?
With total debt exceeding equities, BATR.K is considered a highly levered 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 BATR.K is currently unprofitable, 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 BATR.K’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. But, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for BATR.K’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Liberty Braves Group to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for BATR.K’s future growth? Take a look at our free research report of analyst consensus for BATR.K’s outlook.
- 2. Valuation: What is BATR.K 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 BATR.K 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.