Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Seaboard Corporation (NYSEMKT:SEB), with a market cap of US$5.0b, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine SEB’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into SEB here.
SEB’s Debt (And Cash Flows)
SEB's debt levels surged from US$697m to US$926m over the last 12 months , which includes long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$1.5b to keep the business going. Moreover, SEB has generated US$238m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 26%, meaning that SEB’s operating cash is sufficient to cover its debt.
Does SEB’s liquid assets cover its short-term commitments?
Looking at SEB’s US$784m in current liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$3.0b, with a current ratio of 3.86x. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors.
Does SEB face the risk of succumbing to its debt-load?
With debt at 28% of equity, SEB may be thought of as appropriately levered. SEB is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for SEB, and the company also has the ability and headroom to increase debt if needed going forward.
SEB’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for SEB's financial health. Other important fundamentals need to be considered alongside. You should continue to research Seaboard to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SEB’s future growth? Take a look at our free research report of analyst consensus for SEB’s outlook.
- Valuation: What is SEB 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 SEB 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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.