Is New Concept Energy Inc (NYSEMKT:GBR) A Financially Sound Company?
Investors are always looking for growth in small-cap stocks like New Concept Energy Inc (AMEX:GBR), with a market cap of US$2.95M. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Oil and Gas industry, even ones that are profitable, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into GBR here.
Does GBR generate enough cash through operations?
Over the past year, GBR has reduced its debt from US$2.04M to US$392.00K , which is made up of current and long term debt. With this debt payback, GBR currently has US$113.00K remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of GBR’s operating efficiency ratios such as ROA here.
Can GBR pay its short-term liabilities?
With current liabilities at US$393.00K, the company has been able to meet these obligations given the level of current assets of US$438.00K, with a current ratio of 1.11x. Usually, for Oil and Gas companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does GBR face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 10.36%, GBR’s debt level may be seen as prudent. This range is considered safe as GBR is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
Although GBR’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how GBR has been performing in the past. I suggest you continue to research New Concept Energy to get a more holistic view of the stock by looking at:
1. Historical Performance: What has GBR’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. 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.
