Noble Midstream Partners LP (NYSE:NBLX) is a small-cap stock with a market capitalization of US$1.83b. 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? Companies operating in the Oil and Gas industry, even ones that are profitable, are more likely to be higher risk. So, understanding the company’s financial health becomes crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I suggest you dig deeper yourself into NBLX here.
Does NBLX produce enough cash relative to debt?
Over the past year, NBLX has ramped up its debt from US$193.8m to US$530.0m , which comprises of short- and long-term debt. With this growth in debt, NBLX currently has US$16.2m remaining in cash and short-term investments for investing into the business. Additionally, NBLX has produced US$196.8m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 37.1%, meaning that NBLX’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In NBLX’s case, it is able to generate 0.37x cash from its debt capital.
Does NBLX’s liquid assets cover its short-term commitments?
At the current liabilities level of US$144.8m liabilities, the company is not able to meet these obligations given the level of current assets of US$69.1m, with a current ratio of 0.48x below the prudent level of 3x.
Is NBLX’s debt level acceptable?
With a debt-to-equity ratio of 45.2%, NBLX can be considered as an above-average leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses.
Although NBLX’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for NBLX’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Noble Midstream Partners to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NBLX’s future growth? Take a look at our free research report of analyst consensus for NBLX’s outlook.
- Historical Performance: What has NBLX’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.
- 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.
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