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Is Cameco Corporation’s (TSE:CCO) Liquidity Good Enough?

Tammie Asher

Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Cameco Corporation (TSX:CCO), with a market capitalization of CA$6.18B, rarely draw their attention from the investing community. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine CCO’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into CCO here. Check out our latest analysis for Cameco

Does CCO generate enough cash through operations?

CCO’s debt level has been constant at around CA$1.49B over the previous year – this includes both the current and long-term debt. At this stable level of debt, CCO currently has CA$591.62M remaining in cash and short-term investments , ready to deploy into the business. On top of this, CCO has generated CA$596.05M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 39.88%, indicating that CCO’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires a positive net income. In CCO’s case, it is able to generate 0.4x cash from its debt capital.

Does CCO’s liquid assets cover its short-term commitments?

At the current liabilities level of CA$410.99M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of CA$2.14B, with a current ratio of 5.2x. However, a ratio greater than 3x may be considered as too high, as CCO could be holding too much capital in a low-return investment environment.

TSX:CCO Historical Debt Jun 20th 18

Can CCO service its debt comfortably?

With a debt-to-equity ratio of 30.38%, CCO’s debt level may be seen as prudent. This range is considered safe as CCO is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. CCO’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.

Next Steps:

CCO’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how CCO has been performing in the past. You should continue to research Cameco to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CCO’s future growth? Take a look at our free research report of analyst consensus for CCO’s outlook.
  2. Valuation: What is CCO 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 CCO 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.