Investors are always looking for growth in small-cap stocks like FC Global Realty Incorporated (NASDAQ:FCRE), with a market cap of USD $5.34M. However, an important fact which most ignore is: how financially healthy is the company? Why is it important? A major downturn in the energy industry has resulted in over 150 companies going bankrupt and has put more than 100 on the verge of a collapse, primarily due to excessive debt. Here are few basic financial health checks to judge whether a company fits the bill or there is an additional risk which you should consider before taking the plunge. Check out our latest analysis for FC Global Realty

Does FCRE generate an acceptable amount of cash through operations?

While failure to manage cash has been one of the major reasons behind the demise of a lot of small businesses, mismanagement comes into the light during tough situations such as an economic recession. These catastrophes does not mean the company can stop servicing its debt obligations. We can test the impact of these adverse events by looking at whether cash from its current operations can pay back its current debt obligations. In the case of FCRE, operating cash flow turned out to be -7.33x its debt level over the past twelve months. This means what FCRE can generate on an annual basis, which is currently a negative value, does not cover what it actually owes its debtors in the near term. This raises a red flag, looking at FCRE’s operations at this point in time.

Can FCRE pay its short-term liabilities?

In addition to debtholders, a company must be able to pay its bills and salaries to keep the business running. As cash flow from operation is hindered by adverse events, FCRE may need to liquidate its short-term assets to meet these upcoming payments. We test for FCRE’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that FCRE does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.

Does FCRE face the risk of succumbing to its debt-load?

Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. In the case of FCRE, the debt-to-equity ratio is 3.52%, which indicates that the company faces low risk associated with debt.

Next Steps:

Are you a shareholder? FCRE’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. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Given that its financial position may be different. I suggest researching market expectations for FCRE’s future growth on our free analysis platform.