Yahoo Finance Is Tornado Global Hydrovacs Inc (CVE:TGH) A Financially Sound Company?
While small-cap stocks, such as Tornado Global Hydrovacs Inc (TSXV:TGH) with its market cap of CA$10.14M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since TGH is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, I know these factors are very high-level, so I suggest you dig deeper yourself into TGH here.
How does TGH’s operating cash flow stack up against its debt?
TGH’s debt levels have fallen from CA$2.80M to CA$735.00K over the last 12 months , which is made up of current and long term debt. With this debt repayment, TGH currently has CA$5.63M remaining in cash and short-term investments , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can assess some of TGH’s operating efficiency ratios such as ROA here.
Can TGH pay its short-term liabilities?
At the current liabilities level of CA$3.54M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of CA$14.87M, with a current ratio of 4.2x. However, a ratio greater than 3x may be considered as too high, as TGH could be holding too much capital in a low-return investment environment.
Can TGH service its debt comfortably?
With debt at 3.97% of equity, TGH may be thought of as having low leverage. TGH is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is virtually non-existent with TGH, and the company has plenty of headroom and ability to raise debt should it need to in the future.
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TGH’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. 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 TGH’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Tornado Global Hydrovacs to get a more holistic view of the stock by looking at:
Historical Performance: What has TGH’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.
