U.S. Markets closed

Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH): Financial Strength Analysis

Michael Crabtree

Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Cheniere Energy Partners LP Holdings LLC (AMEX:CQH), with a market cap of US$6.60B, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine CQH’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into CQH here. See our latest analysis for Cheniere Energy Partners Holdings

Can CQH service its debt comfortably?

A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. The good news for investors is that Cheniere Energy Partners Holdings has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with CQH, and the company has plenty of headroom and ability to raise debt should it need to in the future.

AMEX:CQH Historical Debt Mar 13th 18

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

Given zero long-term debt on its balance sheet, Cheniere Energy Partners Holdings has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at US$76.00K, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 9.39x. Though, anything above 3x is considered high and could mean that CQH has too much idle capital in low-earning investments.

Next Steps:

CQH has zero-debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, though, some level of debt could also ramp up earnings growth and operational efficiency. Keep in mind I haven’t considered other factors such as how CQH has performed in the past. You should continue to research Cheniere Energy Partners Holdings to get a more holistic view of the stock by looking at:

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