Yahoo Finance What does US Auto Parts Network Inc’s (NASDAQ:PRTS) Balance Sheet Tell Us About Its Future?
Investors are always looking for growth in small-cap stocks like US Auto Parts Network Inc (NASDAQ:PRTS), with a market cap of US$39m. However, an important fact which most ignore is: how financially healthy is the business? Online Retail businesses operating in the environment facing headwinds from current disruption, in particular ones that run negative earnings, are inclined towards being higher risk. Assessing first and foremost the financial health is vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, I know these factors are very high-level, so I recommend you dig deeper yourself into PRTS here.
How much cash does PRTS generate through its operations?
Over the past year, PRTS has reduced its debt from US$9.9m to US$9.3m . With this debt repayment, PRTS’s cash and short-term investments stands at US$8.3m for investing into the business. On top of this, PRTS has produced US$10m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 112%, meaning that PRTS’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires a positive net income. In PRTS’s case, it is able to generate 1.12x cash from its debt capital.
Can PRTS meet its short-term obligations with the cash in hand?
Looking at PRTS’s US$53m in current liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.31x. Generally, for Online Retail companies, this is a reasonable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can PRTS service its debt comfortably?
With a debt-to-equity ratio of 22%, PRTS’s debt level may be seen as prudent. This range is considered safe as PRTS is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with PRTS, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
PRTS has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for PRTS’s financial health. Other important fundamentals need to be considered alongside. You should continue to research U.S. Auto Parts Network to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PRTS’s future growth? Take a look at our free research report of analyst consensus for PRTS’s outlook.
Valuation: What is PRTS 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 PRTS 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.
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.
