What You Must Know About The Meet Group Inc’s (NASDAQ:MEET) Financial Strength
The Meet Group Inc (NASDAQ:MEET) is a small-cap stock with a market capitalization of US$293m. 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? Given that MEET is not presently profitable, it’s vital to assess 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. Though, I know these factors are very high-level, so I suggest you dig deeper yourself into MEET here.
How much cash does MEET generate through its operations?
MEET’s debt levels surged from US$19k to US$41m over the last 12 months , which accounts for long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$22m for investing into the business. On top of this, MEET has generated cash from operations of US$27m over the same time period, leading to an operating cash to total debt ratio of 66%, signalling that MEET’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for loss making companies since metrics such as return on asset (ROA) requires a positive net income. In MEET’s case, it is able to generate 0.66x cash from its debt capital.
Can MEET meet its short-term obligations with the cash in hand?
With current liabilities at US$45m, it seems that the business has been able to meet these obligations given the level of current assets of US$51m, with a current ratio of 1.14x. For Interactive Media and Services companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does MEET face the risk of succumbing to its debt-load?
With debt at 21% of equity, MEET may be thought of as appropriately levered. This range is considered safe as MEET is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. MEET’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
Next Steps:
MEET has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure MEET has company-specific issues impacting its capital structure decisions. I recommend you continue to research Meet Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MEET’s future growth? Take a look at our free research report of analyst consensus for MEET’s outlook.
Valuation: What is MEET 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 MEET 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 editorial-team@simplywallst.com.
