In This Article:
Imagion Biosystems Inc (ASX:IBX) is a small-cap stock with a market capitalization of AU$13.24M. 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? Medical Equipment companies, especially ones that are currently loss-making, are more likely to be higher risk. So, understanding the company’s financial health becomes essential. Here are few basic financial health checks you should consider before taking the plunge. Though, this commentary is still very high-level, so I suggest you dig deeper yourself into IBX here.
Does IBX generate an acceptable amount of cash through operations?
IBX has shrunken its total debt levels in the last twelve months, from AU$13.93M to AU$80.01K , which is made up of current and long term debt. With this debt repayment, IBX’s cash and short-term investments stands at AU$6.87M for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of IBX’s operating efficiency ratios such as ROA here.
Does IBX’s liquid assets cover its short-term commitments?
With current liabilities at AU$639.44K, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 11.37x. However, a ratio greater than 3x may be considered as too high, as IBX could be holding too much capital in a low-return investment environment.
Is IBX’s debt level acceptable?
IBX’s level of debt is low relative to its total equity, at 1.15%. This range is considered safe as IBX is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for IBX, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
Although IBX’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. This is only a rough assessment of financial health, and I’m sure IBX has company-specific issues impacting its capital structure decisions. You should continue to research Imagion Biosystems to get a more holistic view of the stock by looking at: