What You Should Know About StatPro Group plc's (LON:SOG) Financial Strength
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Investors are always looking for growth in small-cap stocks like StatPro Group plc (LON:SOG), with a market cap of UK£99m. However, an important fact which most ignore is: how financially healthy is the business? Since SOG is loss-making right now, it’s essential to evaluate the current state of its operations and pathway to profitability. Let's work through some financial health checks you may wish to consider if you're interested in this stock. However, potential investors would need to take a closer look, and I recommend you dig deeper yourself into SOG here.
SOG’s Debt (And Cash Flows)
SOG has built up its total debt levels in the last twelve months, from UK£25m to UK£27m , which includes long-term debt. With this rise in debt, the current cash and short-term investment levels stands at UK£2.6m , ready to be used for running the business. On top of this, SOG has produced cash from operations of UK£10m over the same time period, resulting in an operating cash to total debt ratio of 37%, meaning that SOG’s operating cash is sufficient to cover its debt.
Can SOG pay its short-term liabilities?
At the current liabilities level of UK£35m, it appears that the company may not be able to easily meet these obligations given the level of current assets of UK£18m, with a current ratio of 0.52x. The current ratio is the number you get when you divide current assets by current liabilities.
Is SOG’s debt level acceptable?
With a debt-to-equity ratio of 99%, SOG can be considered as an above-average leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies. Though, since SOG is currently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
SOG’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for SOG's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research StatPro Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SOG’s future growth? Take a look at our free research report of analyst consensus for SOG’s outlook.
Valuation: What is SOG 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 SOG is currently mispriced by the market.
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.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
