Is FDI’s debt level acceptable?

With total debt exceeding equities, FDI is considered a highly levered company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since FDI is currently unprofitable, there’s a question of sustainability of its current operations. 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:

With a high level of debt on its balance sheet, FDI could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for FDI to increase its operational efficiency. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for FDI’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Firestone Diamonds to get a better picture of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for FDI’s future growth? Take a look at our free research report of analyst consensus for FDI’s outlook.
• 2. Valuation: What is FDI 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 FDI is currently mispriced by the market.
• 3. 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 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.