While small-cap stocks, such as CARBO Ceramics Inc (NYSE:CRR) with its market cap of US$235.21m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Energy Services companies, especially ones that are currently loss-making, are inclined towards being higher risk. So, understanding the company’s financial health becomes vital. I believe these basic checks tell most of the story you need to know. Nevertheless, since I only look at basic financial figures, I suggest you dig deeper yourself into CRR here.
How does CRR’s operating cash flow stack up against its debt?
CRR has built up its total debt levels in the last twelve months, from US$80.40m to US$0 , which is made up of current and long term debt. With this rise in debt, CRR currently has US$68.17m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of CRR’s operating efficiency ratios such as ROA here.
Can CRR meet its short-term obligations with the cash in hand?
With current liabilities at US$42.43m, the company has been able to meet these commitments with a current assets level of US$195.80m, leading to a 4.61x current account ratio. Though, anything above 3x is considered high and could mean that CRR has too much idle capital in low-earning investments.
Does CRR face the risk of succumbing to its debt-load?
With debt at 22.89% of equity, CRR may be thought of as appropriately levered. This range is considered safe as CRR is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. CRR’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.
Although CRR’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 CRR has been performing in the past. You should continue to research CARBO Ceramics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CRR’s future growth? Take a look at our free research report of analyst consensus for CRR’s outlook.
- Valuation: What is CRR 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 CRR 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 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.