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Coeur Mining, Inc. (NYSE:CDE) is a small-cap stock with a market capitalization of US$1.0b. 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? Since CDE is loss-making right now, it’s vital to understand the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, this commentary is still very high-level, so I recommend you dig deeper yourself into CDE here.
How much cash does CDE generate through its operations?
CDE has built up its total debt levels in the last twelve months, from US$289m to US$429m – this includes long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$105m for investing into the business. Additionally, CDE has generated US$112m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 26%, meaning that CDE’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In CDE’s case, it is able to generate 0.26x cash from its debt capital.
Does CDE’s liquid assets cover its short-term commitments?
With current liabilities at US$147m, it appears that the company has been able to meet these commitments with a current assets level of US$287m, leading to a 1.96x current account ratio. Generally, for Metals and Mining companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Is CDE’s debt level acceptable?
CDE is a relatively highly levered company with a debt-to-equity of 56%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since CDE 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.
CDE’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. This is only a rough assessment of financial health, and I’m sure CDE has company-specific issues impacting its capital structure decisions. You should continue to research Coeur Mining to get a better picture of the small-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CDE’s future growth? Take a look at our free research report of analyst consensus for CDE’s outlook.
- Valuation: What is CDE 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 CDE 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 firstname.lastname@example.org.