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StealthGas Inc (NASDAQ:GASS): Time For A Financial Health Check

While small-cap stocks, such as StealthGas Inc (NASDAQ:GASS) with its market cap of US$174.19M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Oil and Gas industry, especially ones that are currently loss-making, tend to be high risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into GASS here.

Does GASS generate an acceptable amount of cash through operations?

Over the past year, GASS has maintained its debt levels at around US$385.03M made up of current and long term debt. At this constant level of debt, GASS currently has US$51.75M remaining in cash and short-term investments , ready to deploy into the business. On top of this, GASS has generated US$52.35M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 13.60%, meaning that GASS’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires a positive net income. In GASS’s case, it is able to generate 0.14x cash from its debt capital.

Can GASS meet its short-term obligations with the cash in hand?

With current liabilities at US$78.75M, the company has not been able to meet these commitments with a current assets level of US$62.84M, leading to a 0.8x current account ratio. which is under the appropriate industry ratio of 3x.

NasdaqGS:GASS Historical Debt Feb 23rd 18
NasdaqGS:GASS Historical Debt Feb 23rd 18

Does GASS face the risk of succumbing to its debt-load?

GASS is a relatively highly levered company with a debt-to-equity of 67.14%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since GASS is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

At its current level of cash flow coverage, GASS has room for improvement to better cushion for events which may require debt repayment. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. This is only a rough assessment of financial health, and I’m sure GASS has company-specific issues impacting its capital structure decisions. I suggest you continue to research StealthGas to get a more holistic view of the stock by looking at:


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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