Yahoo Finance What Does Alcanna Inc.'s (TSE:CLIQ) Balance Sheet Tell Us About It?
Alcanna Inc. (TSE:CLIQ) is a small-cap stock with a market capitalization of CA$217m. 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? Given that CLIQ is not presently profitable, it’s vital to assess the current state of its operations and pathway to profitability. Let's work through some financial health checks you may wish to consider if you're interested in this stock. However, this is not a comprehensive overview, so I’d encourage you to dig deeper yourself into CLIQ here.
Does CLIQ Produce Much Cash Relative To Its Debt?
CLIQ has shrunk its total debt levels in the last twelve months, from CA$102m to CA$73m , which also accounts for long term debt. With this debt payback, CLIQ currently has CA$64m remaining in cash and short-term investments to keep the business going. Moving on, operating cash flow was negative over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can assess some of CLIQ’s operating efficiency ratios such as ROA here.
Can CLIQ pay its short-term liabilities?
With current liabilities at CA$54m, it seems that the business has been able to meet these obligations given the level of current assets of CA$171m, with a current ratio of 3.17x. The current ratio is calculated by dividing current assets by current liabilities. However, a ratio above 3x may be considered excessive by some investors.
Is CLIQ’s debt level acceptable?
CLIQ is a relatively highly levered company with a debt-to-equity of 45%. This is somewhat unusual for small-caps companies, since lenders are often hesitant to provide attractive interest rates to less-established businesses. However, since CLIQ is presently loss-making, sustainability of its current state of operations becomes a concern. 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:
Although CLIQ’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around CLIQ's liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for CLIQ's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Alcanna to get a more holistic view of the small-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for CLIQ’s future growth? Take a look at our free research report of analyst consensus for CLIQ’s outlook.
Valuation: What is CLIQ 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 CLIQ 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.
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