Are Wilhelmina International Inc’s (NASDAQ:WHLM) Interest Costs Too High?
Investors are always looking for growth in small-cap stocks like Wilhelmina International Inc (NASDAQ:WHLM), with a market cap of US$37.51M. However, an important fact which most ignore is: how financially healthy is the business? Evaluating financial health as part of your investment thesis is essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into WHLM here.
Does WHLM generate enough cash through operations?
WHLM’s debt levels have fallen from US$2.65M to US$2.15M over the last 12 months , which is made up of current and long term debt. With this reduction in debt, WHLM currently has US$4.26M remaining in cash and short-term investments , ready to deploy 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 take a look at some of WHLM’s operating efficiency ratios such as ROA here.
Does WHLM’s liquid assets cover its short-term commitments?
With current liabilities at US$14.70M, the company has been able to meet these obligations given the level of current assets of US$18.06M, with a current ratio of 1.23x. For Commercial Services companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does WHLM face the risk of succumbing to its debt-load?
WHLM’s level of debt is low relative to its total equity, at 8.20%. This range is considered safe as WHLM is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
Although WHLM’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 an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure WHLM has company-specific issues impacting its capital structure decisions. I recommend you continue to research Wilhelmina International to get a better picture of the stock by looking at:
Historical Performance: What has WHLM’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.
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.
