What You Must Know About Team Inc’s (NYSE:TISI) Financial Strength
Team Inc (NYSE:TISI) is a small-cap stock with a market capitalization of US$518.78M. 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 TISI is not presently profitable, it’s essential to assess the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, given that I have not delve into the company-specifics, I recommend you dig deeper yourself into TISI here.
Does TISI generate an acceptable amount of cash through operations?
Over the past year, TISI has ramped up its debt from US$366.91M to US$387.75M , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$26.55M for investing 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 examine some of TISI’s operating efficiency ratios such as ROA here.
Can TISI meet its short-term obligations with the cash in hand?
Looking at TISI’s most recent US$147.78M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$397.06M, with a current ratio of 2.69x. Generally, for Commercial Services companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can TISI service its debt comfortably?
With a debt-to-equity ratio of 84.76%, TISI can be considered as an above-average leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since TISI is presently loss-making, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
TISI’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how TISI has been performing in the past. I suggest you continue to research Team to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TISI’s future growth? Take a look at our free research report of analyst consensus for TISI’s outlook.
Valuation: What is TISI 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 TISI 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 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.
