What does The St Joe Company’s (NYSE:JOE) Balance Sheet Tell Us About Its Future?
While small-cap stocks, such as The St Joe Company (NYSE:JOE) with its market cap of US$1.21B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, this commentary is still very high-level, so I suggest you dig deeper yourself into JOE here.
How does JOE’s operating cash flow stack up against its debt?
JOE has sustained its debt level by about US$231.35M over the last 12 months – this includes both the current and long-term debt. At this current level of debt, JOE’s cash and short-term investments stands at US$244.83M for investing into the business. On top of this, JOE has generated US$12.87M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 5.56%, indicating that JOE’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In JOE’s case, it is able to generate 0.056x cash from its debt capital.
Can JOE meet its short-term obligations with the cash in hand?
At the current liabilities level of US$14.86M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$309.31M, with a current ratio of 20.82x. However, a ratio greater than 3x may be considered as too high, as JOE could be holding too much capital in a low-return investment environment.
Is JOE’s debt level acceptable?
JOE is a relatively highly levered company with a debt-to-equity of 40.97%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
JOE’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure JOE has company-specific issues impacting its capital structure decisions. You should continue to research St. Joe to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
1. Future Outlook: What are well-informed industry analysts predicting for JOE’s future growth? Take a look at this free research report of analyst consensus for JOE’s outlook.
2. Historical Performance: What has JOE’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 JOE’s historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a 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.
