Investors are always looking for growth in small-cap stocks like Pulmatrix Inc (NASDAQ:PULM), with a market cap of US$31.15M. However, an important fact which most ignore is: how financially healthy is the business? Pharmaceuticals companies, especially ones that are currently loss-making, are more likely to be higher risk. Assessing first and foremost the financial health is vital. Here are few basic financial health checks you should consider before taking the plunge. However, I know these factors are very high-level, so I recommend you dig deeper yourself into PULM here.
Does PULM generate enough cash through operations?
Over the past year, PULM has reduced its debt from US$6.72M to US$5.80M – this includes both the current and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$4.18M 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 assess some of PULM’s operating efficiency ratios such as ROA here.
Does PULM’s liquid assets cover its short-term commitments?
Looking at PULM’s most recent US$4.65M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.02x. For Pharmaceuticals companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Is PULM’s debt level acceptable?
With a debt-to-equity ratio of 30.49%, PULM’s debt level may be seen as prudent. This range is considered safe as PULM is not taking on too much debt obligation, which may be constraining for future growth. Investors’ risk associated with debt is very low with PULM, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Although PULM’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how PULM has been performing in the past. You should continue to research Pulmatrix to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for PULM’s future growth? Take a look at our free research report of analyst consensus for PULM’s outlook.
- 2. Historical Performance: What has PULM’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.