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Is Collegium Pharmaceutical Inc (NASDAQ:COLL) A Financially Sound Company?

While small-cap stocks, such as Collegium Pharmaceutical Inc (NASDAQ:COLL) with its market cap of US$879.63m, 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 Pharmaceuticals industry, in particular ones that run negative earnings, are inclined towards being higher risk. Assessing first and foremost the financial health is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, I know these factors are very high-level, so I recommend you dig deeper yourself into COLL here.

Does COLL produce enough cash relative to debt?

Over the past year, COLL has reduced its debt from US$4.15m to US$1.48m – this includes both the current and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at US$118.70m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of COLL’s operating efficiency ratios such as ROA here.

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

Looking at COLL’s most recent US$31.49m liabilities, the company has been able to meet these obligations given the level of current assets of US$133.48m, with a current ratio of 4.24x. Though, anything above 3x is considered high and could mean that COLL has too much idle capital in low-earning investments.

NasdaqGS:COLL Historical Debt June 26th 18
NasdaqGS:COLL Historical Debt June 26th 18

Can COLL service its debt comfortably?

With a debt-to-equity ratio of 12.66%, COLL’s debt level may be seen as prudent. This range is considered safe as COLL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is very low for COLL, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

Although COLL’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 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 COLL has been performing in the past. I suggest you continue to research Collegium Pharmaceutical to get a more holistic view of the stock by looking at:

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  1. Future Outlook: What are well-informed industry analysts predicting for COLL’s future growth? Take a look at our free research report of analyst consensus for COLL’s outlook.

  2. Valuation: What is COLL 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 COLL is currently mispriced by the market.

  3. 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.