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What You Must Know About Onvia Inc’s (ONVI) Financial Health

Onvia Inc (NASDAQ:ONVI), which has zero-debt on its balance sheet, can maximize capital returns by increasing debt due to its lower cost of capital. However, the trade-off is ONVI will have to follow strict debt obligations which will reduce its financial flexibility. Zero-debt can alleviate some risk associated with the company meeting debt obligations, but this doesn’t automatically mean ONVI has outstanding financial strength. I’ve put together a small checklist, which I believe provides a ballpark estimate of their financial health status. View our latest analysis for Onvia

Does ONVI’s growth rate justify its decision for financial flexibility over lower cost of capital?

Debt funding can be cheaper than issuing new equity due to lower interest cost on debt. But the downside of having debt in a company’s balance sheet is the debtholder’s higher claim on its assets in the case of liquidation, as well as stricter capital management requirements. The lack of debt on ONVI’s balance sheet may be because it does not have access to cheap capital, or it may believe this trade-off is not worth it. Choosing financial flexibility over capital returns make sense if ONVI is a high-growth company. A single-digit revenue growth of 2.00% for ONVI is considerably low for a small-cap company. More capital can help the business grow faster. If ONVI is not expecting exceptional future growth, then the decision to avoid may cost shareholders in the long term.

Does ONVI’s liquid assets cover its short-term commitments?

In addition to debtholders, a company must be able to pay its bills and salaries to keep the business running. During times of unfavourable events, ONVI could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We should examine if the company’s cash and short-term investment levels match its current liabilities. Our analysis shows that ONVI is unable to meet all of its upcoming commitments with its cash and other short-term assets. While this is not abnormal for companies, as their cash is better invested in the business or returned to investors than lying around, it does bring about some concerns should any unfavourable circumstances arise.

Next Steps:

Are you a shareholder? As ONVI’s revenues are not growing at a fast enough pace, not taking advantage of lower cost debt may not be the best strategy. Shareholders should understand why the company isn’t opting for cheaper cost of capital to fund future growth, especially when liquidity may also be an issue. I suggest you take a look into a future growth analysis to properly assess the company’s position.

Are you a potential investor? ONVI low revenue growth means the cost of financial flexibility may not be worth the benefit. In addition, its lack of liquidity means raising debt could prevent any short-term operational hiccup should adverse events arise. I encourage you to continue your research by taking a look at ONVI’s past performance to figure out ONVI’s financial health position.


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.

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