Is Quisitive Technology Solutions, Inc.'s (CVE:QUIS) Balance Sheet A Threat To Its Future?

Simply Wall St

Quisitive Technology Solutions, Inc. (CVE:QUIS) is a small-cap stock with a market capitalization of CA$13m. 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? Since QUIS is loss-making right now, it’s essential to evaluate the current state of its operations and pathway to profitability. We'll look at some basic checks that can form a snapshot the company’s financial strength. However, this is just a partial view of the stock, and I suggest you dig deeper yourself into QUIS here.

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Does QUIS Produce Much Cash Relative To Its Debt?

QUIS's debt level has been constant at around US$5.5m over the previous year made up of predominantly near term debt. At this stable level of debt, QUIS's cash and short-term investments stands at US$273k , ready to be used for running the business. We note it produced negative cash flow over the last twelve months. For this article’s sake, I won’t be looking at this today, but you can assess some of QUIS’s operating efficiency ratios such as ROA here.

Can QUIS pay its short-term liabilities?

With current liabilities at US$8.8m, it appears that the company may not have an easy time meeting these commitments with a current assets level of US$2.4m, leading to a current ratio of 0.27x. The current ratio is calculated by dividing current assets by current liabilities.

TSXV:QUIS Historical Debt, May 23rd 2019

Is QUIS’s debt level acceptable?

Since total debt levels exceed equity, QUIS is a highly 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. But since QUIS is presently loss-making, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Next Steps:

QUIS’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. Though its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for QUIS's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Quisitive Technology Solutions to get a better picture of the stock by looking at:

  1. Historical Performance: What has QUIS's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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.