TSXV:SNR Historical Debt Nov 10th 17
There are many headwinds that come unannounced, such as natural disasters and political turmoil, which can challenge a small business and its ability to adapt and recover. These adverse events bring devastation and yet does not absolve the company from its debt. 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. Last year, SNR’s operating cash flow was -0.2x its current debt. This means what SNR 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 SNR’s operations at this point in time.
Can SNR meet its short-term obligations with the cash in hand?
What about its other commitments such as payments to suppliers and salaries to its employees? As cash flow from operation is hindered by adverse events, SNR may need to liquidate its short-term assets to meet these upcoming payments. We test for SNR’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. Our analysis shows that SNR does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.
Does SNR face the risk of succumbing to its debt-load?
A substantially higher debt poses a significant threat to a company’s profitability during a downturn. SNR’s debt-to-equity ratio exceeds 100%, which indicates that the company is holding a high level of debt relative to its net worth. In the event of financial turmoil, the company may experience difficulty meeting interest and other debt obligations.
Next Steps:
Are you a shareholder? At its current level of cash flow coverage, SNR has room for improvement to better cushion for events which may require debt repayment. However, its high liquidity means the company should continue to operate smoothly in the case of adverse events. Given that its financial position may be different. You should always be keeping abreast of market expectations for SNR’s future growth on our free analysis platform.
Are you a potential investor? SNR’s high debt levels is not met with high cash flow coverage. This leaves room for improvement in terms of debt management and operational efficiency. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. You should continue your analysis by taking a look at SNR’s past performance analysis on our free platform to figure out SNR’s financial health position.
To help readers see pass 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.