Investors are always looking for growth in small-cap stocks like Forum Energy Technologies Inc (NYSE:FET), with a market cap of US$933m. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Energy Services industry, even ones that are profitable, tend to be high risk. So, understanding the company’s financial health becomes essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into FET here.
How does FET’s operating cash flow stack up against its debt?
FET has built up its total debt levels in the last twelve months, from US$399m to US$467m , which is made up of current and long term debt. With this growth in debt, the current cash and short-term investment levels stands at US$39m 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 assess some of FET’s operating efficiency ratios such as ROA here.
Does FET’s liquid assets cover its short-term commitments?
Looking at FET’s most recent US$229m liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.34x. Having said that, many consider anything above 3x to be quite high and could mean that FET has too much idle capital in low-earning investments.
Does FET face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 33%, FET’s debt level may be seen as prudent. FET is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
FET’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure FET has company-specific issues impacting its capital structure decisions. I suggest you continue to research Forum Energy Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FET’s future growth? Take a look at our free research report of analyst consensus for FET’s outlook.
- Valuation: What is FET 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 FET 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.