Investors are always looking for growth in small-cap stocks like MoxieTech Group AB (publ) (STO:MOXI), with a market cap of kr55.9m. However, an important fact which most ignore is: how financially healthy is the business? Since MOXI is loss-making right now, it’s crucial to evaluate the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, I know these factors are very high-level, so I suggest you dig deeper yourself into MOXI here.
How much cash does MOXI generate through its operations?
MOXI’s debt levels have fallen from kr20.4m to kr6.1m over the last 12 months , which comprises of short- and long-term debt. With this debt payback, MOXI currently has kr4.3m remaining in cash and short-term investments for investing into the business. Moreover, MOXI has produced cash from operations of kr10.1m during the same period of time, leading to an operating cash to total debt ratio of 166%, indicating that MOXI’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency for loss making businesses since metrics such as return on asset (ROA) requires a positive net income. In MOXI’s case, it is able to generate 1.66x cash from its debt capital.
Can MOXI pay its short-term liabilities?
With current liabilities at kr71.2m, the company may not be able to easily meet these obligations given the level of current assets of kr45.6m, with a current ratio of 0.64x.
Is MOXI’s debt level acceptable?
With a debt-to-equity ratio of 39.7%, MOXI’s debt level may be seen as prudent. MOXI is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for MOXI, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
MOXI’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. However, its lack of liquidity raises questions over current asset management practices for the small-cap. Keep in mind I haven’t considered other factors such as how MOXI has been performing in the past. I suggest you continue to research MoxieTech Group to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for MOXI’s future growth? Take a look at our free research report of analyst consensus for MOXI’s outlook.
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Valuation: What is MOXI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MOXI is currently mispriced by the market.
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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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.