What Investors Should Know About Clearside Biomedical Inc’s (NASDAQ:CLSD) Financial Strength
Clearside Biomedical Inc (NASDAQ:CLSD) is a small-cap stock with a market capitalization of US$210.7m. 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? Pharmaceuticals companies, in particular ones that run negative earnings, tend to be high risk. So, understanding the company’s financial health becomes essential. I believe these basic checks tell most of the story you need to know. However, this commentary is still very high-level, so I suggest you dig deeper yourself into CLSD here.
How does CLSD’s operating cash flow stack up against its debt?
Over the past year, CLSD has ramped up its debt from US$7.8m to US$9.8m , which is made up of current and long term debt. With this growth in debt, CLSD’s cash and short-term investments stands at US$84.4m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of CLSD’s operating efficiency ratios such as ROA here.
Can CLSD pay its short-term liabilities?
At the current liabilities level of US$10.9m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 7.93x. However, anything above 3x is considered high and could mean that CLSD has too much idle capital in low-earning investments.
Does CLSD face the risk of succumbing to its debt-load?
CLSD’s level of debt is appropriate relative to its total equity, at 14.8%. CLSD is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for CLSD, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
CLSD’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how CLSD has been performing in the past. I suggest you continue to research Clearside Biomedical to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CLSD’s future growth? Take a look at our free research report of analyst consensus for CLSD’s outlook.
Valuation: What is CLSD 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 CLSD 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.
