Investors are always looking for growth in small-cap stocks like Oxford Industries Inc (NYSE:OXM), with a market cap of US$1.59b. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes crucial, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I suggest you dig deeper yourself into OXM here.
How much cash does OXM generate through its operations?
Over the past year, OXM has reduced its debt from US$93.29m to US$72.24m , which is made up of current and long term debt. With this reduction in debt, OXM’s cash and short-term investments stands at US$4.66m for investing into the business. Additionally, OXM has produced US$97.84m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 135.43%, signalling that OXM’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In OXM’s case, it is able to generate 1.35x cash from its debt capital.
Can OXM pay its short-term liabilities?
Looking at OXM’s most recent US$111.19m liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$250.27m, leading to a 2.25x current account ratio. Usually, for Luxury companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does OXM face the risk of succumbing to its debt-load?
OXM’s level of debt is appropriate relative to its total equity, at 16.28%. OXM is not taking on too much debt commitment, which may be constraining for future growth. We can test if OXM’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For OXM, the ratio of 29.56x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as OXM’s high interest coverage is seen as responsible and safe practice.
OXM’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how OXM has been performing in the past. You should continue to research Oxford Industries to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for OXM’s future growth? Take a look at our free research report of analyst consensus for OXM’s outlook.
- Valuation: What is OXM 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 OXM 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 email@example.com.