Voxel SA (WSE:VOX) is a small-cap stock with a market capitalization of zł303.5m. 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? Healthcare companies, even ones that are profitable, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, this commentary is still very high-level, so I’d encourage you to dig deeper yourself into VOX here.
Does VOX produce enough cash relative to debt?
VOX’s debt levels surged from zł39.5m to zł42.3m over the last 12 months , which comprises of short- and long-term debt. With this rise in debt, VOX currently has zł9.2m remaining in cash and short-term investments , ready to deploy into the business. Moreover, VOX has produced cash from operations of zł27.9m during the same period of time, leading to an operating cash to total debt ratio of 66.0%, indicating that VOX’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In VOX’s case, it is able to generate 0.66x cash from its debt capital.
Does VOX’s liquid assets cover its short-term commitments?
At the current liabilities level of zł44.1m liabilities, it appears that the company has been able to meet these commitments with a current assets level of zł51.1m, leading to a 1.16x current account ratio. Usually, for Healthcare companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can VOX service its debt comfortably?
VOX’s level of debt is appropriate relative to its total equity, at 31.5%. VOX is not taking on too much debt commitment, which may be constraining for future growth. We can test if VOX’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For VOX, the ratio of 11.39x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving VOX ample headroom to grow its debt facilities.
VOX has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how VOX has been performing in the past. I recommend you continue to research Voxel to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for VOX’s future growth? Take a look at our free research report of analyst consensus for VOX’s outlook.
- Valuation: What is VOX 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 VOX 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 past 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.
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