Altius Minerals Corporation (TSX:ALS) is a small-cap stock with a market capitalization of CA$645.65M. 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 ALS is not presently profitable, it’s vital to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, I know these factors are very high-level, so I recommend you dig deeper yourself into ALS here.
Does ALS generate enough cash through operations?
ALS has built up its total debt levels in the last twelve months, from CA$64.1M to CA$78.3M , which is made up of current and long term debt. With this growth in debt, ALS currently has CA$34.8M remaining in cash and short-term investments for investing into the business. Moreover, ALS has generated cash from operations of CA$6.2M over the same time period, leading to an operating cash to total debt ratio of 7.96%, indicating that ALS’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires positive earnings. In ALS’s case, it is able to generate 0.08x cash from its debt capital.
Can ALS meet its short-term obligations with the cash in hand?
With current liabilities at CA$15.3M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.69x. Usually, for metals and mining companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can ALS service its debt comfortably?
ALS’s level of debt is appropriate relative to its total equity, at 20.33%. ALS is not taking on too much debt commitment, which may be constraining for future growth. Investors’ risk associated with debt is very low with ALS, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
Are you a shareholder? Although ALS’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 exhibits an ability to meet its near term obligations should an adverse event occur. Given that its financial position may be different. You should always be researching market expectations for ALS’s future growth on our free analysis platform.