While small-cap stocks, such as Siyata Mobile Inc (CVE:SIM) with its market cap of CA$36.03m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Communications companies, in particular ones that run negative earnings, are inclined towards being higher risk. Assessing first and foremost the financial health is essential. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into SIM here.
Does SIM produce enough cash relative to debt?
SIM has built up its total debt levels in the last twelve months, from CA$250.00k to CA$0 , which is made up of current and long term debt. With this rise in debt, SIM’s cash and short-term investments stands at CA$4.38m 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 examine some of SIM’s operating efficiency ratios such as ROA here.
Can SIM meet its short-term obligations with the cash in hand?
Looking at SIM’s most recent CA$3.56m liabilities, it appears that the company has been able to meet these commitments with a current assets level of CA$13.21m, leading to a 3.71x current account ratio. However, anything above 3x is considered high and could mean that SIM has too much idle capital in low-earning investments.
Is SIM’s debt level acceptable?
With debt at 25.83% of equity, SIM may be thought of as appropriately levered. This range is considered safe as SIM is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with SIM, and the company has plenty of headroom and ability to raise debt should it need to in the future.
SIM’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for SIM’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Siyata Mobile to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SIM’s future growth? Take a look at our free research report of analyst consensus for SIM’s outlook.
- Historical Performance: What has SIM’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.