Investors are always looking for growth in small-cap stocks like SilverSun Technologies, Inc. (NASDAQ:SSNT), with a market cap of US$19m. However, an important fact which most ignore is: how financially healthy is the business? Given that SSNT is not presently profitable, it’s essential to evaluate the current state of its operations and pathway to profitability. Let’s work through some financial health checks you may wish to consider if you’re interested in this stock. However, this is not a comprehensive overview, so I suggest you dig deeper yourself into SSNT here.
Does SSNT Produce Much Cash Relative To Its Debt?
Over the past year, SSNT has ramped up its debt from US$688k to US$1.8m – this includes long-term debt. With this growth in debt, SSNT’s cash and short-term investments stands at US$1.8m to keep the business going. On top of this, SSNT has generated US$1.9m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 105%, signalling that SSNT’s current level of operating cash is high enough to cover debt.
Does SSNT’s liquid assets cover its short-term commitments?
Looking at SSNT’s US$5.7m in current liabilities, it seems that the business may not have an easy time meeting these commitments with a current assets level of US$4.8m, leading to a current ratio of 0.84x. The current ratio is calculated by dividing current assets by current liabilities.
Is SSNT’s debt level acceptable?
With debt reaching 41% of equity, SSNT may be thought of as relatively highly levered. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. Though, since SSNT is currently loss-making, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
SSNT’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. Keep in mind I haven’t considered other factors such as how SSNT has been performing in the past. I suggest you continue to research SilverSun Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SSNT’s future growth? Take a look at our free research report of analyst consensus for SSNT’s outlook.
- Valuation: What is SSNT 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 SSNT 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.