Yahoo Finance How Financially Strong Is QAD Inc. (NASDAQ:QADA)?
QAD Inc. (NASDAQ:QADA) is a small-cap stock with a market capitalization of US$873m. 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? Understanding the company’s financial health becomes essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. The following basic checks can help you get a picture of the company’s balance sheet strength. However, potential investors would need to take a closer look, and I’d encourage you to dig deeper yourself into QADA here.
Does QADA Produce Much Cash Relative To Its Debt?
QADA’s debt level has been constant at around US$13m over the previous year including long-term debt. At this current level of debt, QADA’s cash and short-term investments stands at US$138m to keep the business going. Additionally, QADA has produced cash from operations of US$23m in the last twelve months, leading to an operating cash to total debt ratio of 169%, indicating that QADA’s current level of operating cash is high enough to cover debt.
Can QADA pay its short-term liabilities?
With current liabilities at US$127m, it seems that the business has been able to meet these commitments with a current assets level of US$204m, leading to a 1.61x current account ratio. The current ratio is calculated by dividing current assets by current liabilities. Generally, for Software companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can QADA service its debt comfortably?
With a debt-to-equity ratio of 11%, QADA’s debt level may be seen as prudent. QADA is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
QADA’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for QADA’s financial health. Other important fundamentals need to be considered alongside. You should continue to research QAD to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for QADA’s future growth? Take a look at our free research report of analyst consensus for QADA’s outlook.
Valuation: What is QADA 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 QADA 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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