Cheetah Net Supply Chain Service Inc. (CTNT) Stock Analysis

Cheetah Net Supply Chain Service Inc. (CTNT) Stock Analysis

Market Capitalization: $8.65 Million
Shares Outstanding: 2.51 Million
Sector: Industrial
Industry: Supply Chain Management
Analysis as of: December 18, 2024

1. Company Overview

Cheetah Net Supply Chain Service Inc. (NASDAQ: CTNT) operates within the supply chain management sector, offering specialized services aimed at optimizing and streamlining supply chain operations for businesses. Despite its modest market capitalization, CTNT has experienced fluctuating revenue growth, indicating challenges in maintaining consistent business performance. The company appears to be navigating through periods of expansion and contraction, reflecting the volatile nature of the supply chain industry.

Key Business Segments:

  • Supply Chain Optimization:
    • Logistics Management: Providing end-to-end logistics solutions to enhance efficiency and reduce costs.
    • Inventory Management: Implementing advanced inventory tracking systems to ensure optimal stock levels and minimize waste.
  • Technology Solutions:
    • Supply Chain Software: Developing proprietary software tools to facilitate real-time data analysis and decision-making.
    • Automation Services: Offering automation solutions to streamline supply chain processes and improve operational efficiency.
  • Consulting Services:
    • Process Improvement: Advising clients on best practices for supply chain management and process enhancements.
    • Strategic Planning: Assisting businesses in developing long-term supply chain strategies aligned with their growth objectives.

Strategic Initiatives:

  • Market Expansion: Exploring new geographical markets to increase client base and diversify revenue streams.
  • Service Diversification: Expanding service offerings to include comprehensive supply chain solutions tailored to various industries.
  • Operational Efficiency: Implementing cost-control measures and process optimizations to improve profitability and sustain growth.
  • Technological Innovation: Investing in the development of advanced supply chain technologies to stay competitive and meet evolving client needs.

2. Financial Performance

a. Revenue and Growth

TTM Revenue (as of Sep 30, 2024): $7.70 Million
YoY Revenue Growth (TTM): -81.71%

Analysis:

  • Declining Revenue: CTNT has experienced a significant decline in revenue over the trailing twelve months (TTM), with an 81.71% decrease. This sharp drop indicates potential challenges in maintaining sales momentum or loss of key clients.
  • Volatile Growth Patterns: The company’s revenue growth has been highly volatile, with a peak of +293.83% in FY 2021 followed by a sharp decline. Such fluctuations suggest instability in business operations or market demand.
  • Potential Growth Drivers: Previous revenue spikes may have been driven by large contracts or successful service expansions. However, sustaining such growth appears challenging, necessitating strategic adjustments.

b. Profitability

Net Income (TTM): -$3.07 Million
EPS (TTM): -$1.97
Profit Margin: -39.91%
Return on Equity (ROE): -29.42%
Return on Assets (ROA): -16.89%

Analysis:

  • Negative Profitability: CTNT has incurred a net loss of $3.07 million in the TTM, resulting in a negative profit margin of -39.91%. This indicates that the company’s expenses significantly exceed its revenues.
  • Poor Return Metrics: ROE of -29.42% and ROA of -16.89% reflect inefficiencies in utilizing shareholders’ equity and assets to generate profits. These metrics signal financial distress and operational challenges.
  • Sustainability Concerns: Persistent losses raise concerns about the company’s ability to sustain its operations and achieve profitability without restructuring or securing additional financing.

c. Margins

Gross Margin (TTM): 10.02%
Operating Margin (TTM): -52.15%
Profit Margin (TTM): -39.91%

Analysis:

  • Low Gross Margin: A gross margin of 10.02% suggests that CTNT faces challenges in managing its cost of revenue, which may be impacting its ability to generate sufficient profit from sales.
  • Severe Operating Losses: Operating margin of -52.15% indicates that operating expenses far exceed gross profit, leading to substantial operational losses.
  • Negative Profit Margin: A profit margin of -39.91% highlights the company’s inability to convert sales into profits effectively, exacerbating financial instability.

d. Cash Flow

Operating Cash Flow (TTM): $3.34 Million
Capital Expenditures (CapEx) (TTM): -$0.37 Million
Free Cash Flow (FCF) (TTM): $2.98 Million
FCF Per Share: $1.90

Analysis:

  • Positive Operating Cash Flow: Operating cash flow of $3.34 million indicates that CTNT is generating cash from its core business activities, which is a positive sign amidst operational losses.
  • Positive Free Cash Flow: FCF of $2.98 million suggests that after accounting for capital expenditures, the company retains a portion of its cash flow to reinvest in the business or service debt.
  • Efficient Cash Management: The positive FCF indicates some level of efficiency in managing cash, although it is insufficient to offset net losses entirely.

3. Balance Sheet

Total Assets: $16.83 Million
Total Liabilities: $2.87 Million
Shareholders’ Equity: $13.95 Million
Total Debt: $2.63 Million
Cash & Equivalents: $5.29 Million
Net Cash Position: +$2.66 Million
Debt-to-Equity Ratio: 0.19
Current Ratio: 14.86
Quick Ratio: 10.42
Working Capital: $11.58 Million

Analysis:

  • Strong Liquidity: With a current ratio of 14.86 and a quick ratio of 10.42, CTNT maintains an exceptionally strong ability to meet short-term obligations without relying on external financing.
  • Low Leverage: A debt-to-equity ratio of 0.19 indicates minimal reliance on debt financing, enhancing financial stability and reducing interest obligations.
  • Substantial Working Capital: Positive working capital of $11.58 million ensures operational efficiency and the capacity to fund growth initiatives. However, given the negative profitability, this may not be sufficient to sustain long-term operations without improvement.

4. Valuation

Current Stock Price (Dec 18, 2024): $3.45
PE Ratio (TTM): N/A
Forward PE: N/A
PEG Ratio: N/A
Price-to-Sales (PS) Ratio: 0.70
Price-to-Book (PB) Ratio: 0.62
Price-to-Free Cash Flow (P/FCF) Ratio: 2.91
Price-to-Operating Cash Flow (P/OCF) Ratio: 2.59
EV/Sales: 0.78
EV/FCF: 2.01

Analysis:

  • Lack of PE Ratio: The absence of a PE ratio is due to negative earnings, making traditional valuation metrics inapplicable.
  • Low PS and PB Ratios: PS ratio of 0.70 and PB ratio of 0.62 indicate that the stock is trading at a discount relative to its sales and book value, which may reflect market concerns about profitability and growth prospects.
  • Attractive EV Ratios: EV/Sales of 0.78 and EV/FCF of 2.01 suggest that the company is relatively undervalued based on its revenue and free cash flow, potentially offering value opportunities for investors willing to take on higher risks.
  • Reasonable P/FCF and P/OCF Ratios: P/FCF ratio of 2.91 and P/OCF ratio of 2.59 indicate that the stock is trading at a modest premium relative to its free and operating cash flows, reflecting investor confidence in the company’s ability to improve profitability.

5. Market Performance

52-Week Range: $1.70 – $236.16
52-Week Price Change: -86.69%
Beta (5Y): N/A
Relative Strength Index (RSI): 54.36
Average Volume (20 Days): 1,543,058
Short Interest: 85,148 (3.40% of Shares Outstanding)
Short Ratio (Days to Cover): 0.66

Analysis:

  • Massive Price Decline: CTNT’s stock has plummeted by 86.69% over the past 52 weeks, reflecting severe negative investor sentiment, financial struggles, or market volatility.
  • Low Volatility: The absence of a beta suggests that the stock’s volatility data is unavailable, but the significant price decline indicates inherent volatility and high risk.
  • Neutral RSI: An RSI of 54.36 suggests that the stock is neither overbought nor oversold, maintaining balanced momentum.
  • Moderate Short Interest: With 3.40% of shares outstanding sold short and a short ratio of 0.66 days to cover, there is some bearish sentiment. However, the low short ratio reduces the likelihood of a short squeeze.
  • High Trading Volume: An average volume of 1,543,058 over the past 20 days indicates substantial trading activity, reflecting high liquidity and investor interest despite the price decline.

6. Financial Health and Risks

a. Liquidity

Current Ratio: 14.86
Quick Ratio: 10.42

Analysis:

  • Exceptional Liquidity Position: CTNT’s high current and quick ratios indicate a robust ability to meet short-term obligations without relying on additional financing or asset liquidation.
  • Ample Working Capital: Positive working capital of $11.58 million ensures that the company can support its operational needs and invest in growth initiatives effectively.

b. Leverage

Total Debt: $2.63 Million
Debt-to-Equity Ratio: 0.19
Debt-to-EBITDA Ratio: N/A
Debt-to-FCF Ratio: 0.88
Interest Coverage Ratio: -13.62

Analysis:

  • Low Financial Leverage: A debt-to-equity ratio of 0.19 signifies minimal reliance on debt, enhancing financial stability and reducing financial risk.
  • Negative Interest Coverage: An interest coverage ratio of -13.62 indicates that the company is unable to meet its interest obligations from its earnings, raising the risk of default.
  • Manageable Debt Levels: While the debt levels are low, the negative interest coverage underscores the company’s struggle to generate sufficient earnings to cover interest expenses.

c. Profitability & Cash Flow

  • Significant Losses: CTNT has incurred substantial net losses, with a net income of -$3.07 million and negative profit margins, undermining investor confidence and financial stability.
  • Positive Cash Flow: Operating cash flow of $3.34 million and free cash flow of $2.98 million indicate that the company is generating cash from its core operations, which is positive amidst operational losses.
  • Consistent Cash Management: Positive free cash flow suggests some level of efficiency in managing cash, although it is insufficient to offset net losses entirely.

d. Operational Risks

  • Revenue Decline: The significant decline in revenue over the TTM indicates potential challenges in maintaining sales momentum, client retention, or market demand.
  • High Expense Ratios: Low gross margins and high operating expenses reflect challenges in managing costs, which may hinder profitability and operational efficiency.
  • Market Competition: Operating in the competitive supply chain management sector, CTNT faces challenges from established players and new entrants, potentially impacting market share and profitability.
  • Scalability Challenges: Managing rapid scaling efforts while controlling costs can be challenging, potentially leading to inefficiencies and increased operational risks.

e. Market & Regulatory Risks

  • Economic Downturns: Adverse economic conditions can reduce demand for supply chain services, impacting CTNT’s revenue and profitability.
  • Regulatory Compliance: Navigating diverse regulatory environments related to supply chain operations, data security, and industry-specific regulations can increase operational complexities and costs.
  • Supply Chain Disruptions: Dependence on suppliers and partners for service delivery exposes the company to risks related to supply chain interruptions, leading to potential service delays or increased costs.
  • Technological Risks: Rapid technological advancements require continuous innovation. Failure to adopt new technologies or enhance service offerings could erode CTNT’s competitive advantage.

7. Conclusion

Pros:

  • Strong Liquidity: CTNT maintains an exceptionally high current and quick ratio, ensuring the ability to meet short-term obligations and invest in growth initiatives without relying heavily on external financing.
  • Positive Free Cash Flow: The company generates positive free cash flow, providing some financial flexibility to manage operations, reduce debt, or pursue strategic investments.
  • Undervalued Valuation Metrics: Low PS and PB ratios suggest that the stock may be undervalued relative to its sales and book value, potentially offering value opportunities for investors willing to take on higher risks.
  • Experienced Ownership: With 29.08% of shares owned by insiders and 8.57% by institutions, there is a level of confidence from those closely associated with the company and institutional investors.

Cons:

  • Severe Financial Losses: CTNT is grappling with significant net losses and negative profit margins, raising concerns about its ability to achieve and sustain profitability.
  • Declining Revenue: The sharp decline in revenue over the TTM indicates potential challenges in maintaining sales momentum, client retention, or market demand.
  • Negative Profit Margins: Low gross margins and high operating expenses reflect difficulties in managing costs, which may hinder profitability and operational efficiency.
  • High Short Interest: With 3.40% of shares outstanding sold short, there is bearish sentiment that could exert downward pressure on the stock price, especially in the event of negative news or further financial struggles.
  • Operational Inefficiencies: Negative operating margins and declining revenues suggest operational inefficiencies and challenges in scaling the business effectively.
  • Market Volatility: The stock’s extreme price volatility, reflected in the 52-week range and significant price decline, indicates high risk and potential for further losses.

Investment Recommendation:

Final Note:

Cheetah Net Supply Chain Service Inc. (CTNT) is currently facing considerable financial and operational challenges, marked by declining revenues and substantial losses. Despite maintaining strong liquidity and generating positive free cash flow, the company’s negative profitability and high expense ratios raise serious concerns about its ability to sustain and grow its operations. Disclaimer:
This analysis is for informational purposes only and does not constitute investment advice. Investing involves risks, including potential loss of principal. Past performance is not indicative of future results. Consult a qualified financial advisor before making any investment decisions.

 

 

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