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Are Youngevity International Inc’s (YGYI) Interest Costs Too High?

Youngevity International Inc (NASDAQ:YGYI) is a small-cap stock with a market capitalization of USD $93.27M. 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. The significance of doing due diligence on a company’s financial strength stems from the fact that over 20,000 companies go bankrupt in every quarter in the US alone. These factors make a basic understanding of a company’s financial position of utmost importance for a potential investor. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. View our latest analysis for Youngevity International

How does YGYI’s operating cash flow stack up against its debt?

NasdaqCM:YGYI Historical Debt Oct 21st 17
NasdaqCM:YGYI Historical Debt Oct 21st 17

Unxpected adverse events, such as natural disasters and wars, can be a true test of a company’s capacity to meet its obligations. These adverse events bring devastation and yet does not absolve the company from its debt. Fortunately, we can test the company’s capacity to pay back its debtholders without summoning any catastrophes by looking at how much cash it generates from its current operations. In the case of YGYI, operating cash flow turned out to be -0.04x its debt level over the past twelve months. This means what YGYI can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at YGYI’s operations at this point in time.

Can YGYI pay its short-term liabilities?

What about its commitments to other stakeholders such as payments to suppliers and employees? During times of unfavourable events, YGYI could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. We test for YGYI’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that YGYI does not have enough liquid assets on hand to meet its upcoming liabilities. Though this is a common practice, since cash is better utilized invested in the business or returned to shareholders, it does raise some concerns for investors should adverse events arise.

Can YGYI service its debt comfortably?

While ideally the debt-to equity ratio of a financially healthy company should be less than 40%, several factors such as industry life-cycle and economic conditions can result in a company raising a significant amount of debt. YGYI’s debt-to-equity ratio exceeds 100%, which means that it is a highly leveraged company. This is not a problem if the company has consistently grown its profits. But during a business downturn, as liquidity may dry up, making it hard to operate.

Next Steps:

Are you a shareholder? YGYI’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. In addition to this, the company may struggle to meet its near term liabilities should an adverse event occur. Going forward, its financial position may change. I recommend researching market expectations for YGYI’s future growth on our free analysis platform.

Are you a potential investor? YGYI’s large debt ratio on top of poor cash coverage as well as low liquidity coverage of near-term obligations may scare some investors away intially. However, keep in mind that this is a point-in-time analysis, and today’s performance may not be representative of YGYI’s track record. As a following step, you should take a look at YGYI’s past performance analysis on our free platform to conclude on YGYI’s financial health.


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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