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What You Must Know About Tejon Ranch Co’s (NYSE:TRC) Financial Strength

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  • TRC

Investors are always looking for growth in small-cap stocks like Tejon Ranch Co (NYSE:TRC), with a market cap of US$600.91M. However, an important fact which most ignore is: how financially healthy is the business? Given that TRC is not presently profitable, it’s crucial to understand the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. However, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into TRC here.

Does TRC generate enough cash through operations?

TRC’s debt levels have fallen from US$83.27M to US$70.71M over the last 12 months – this includes both the current and long-term debt. With this reduction in debt, TRC’s cash and short-term investments stands at US$90.98M , ready to deploy into the business. On top of this, TRC has produced US$9.83M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 13.90%, meaning that TRC’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires a positive net income. In TRC’s case, it is able to generate 0.14x cash from its debt capital.

Does TRC’s liquid assets cover its short-term commitments?

At the current liabilities level of US$10.48M liabilities, the company has been able to meet these obligations given the level of current assets of US$103.90M, with a current ratio of 9.92x. Though, anything about 3x may be excessive, since TRC may be leaving too much capital in low-earning investments.

NYSE:TRC Historical Debt Mar 30th 18
NYSE:TRC Historical Debt Mar 30th 18

Is TRC’s debt level acceptable?

With debt at 16.57% of equity, TRC may be thought of as appropriately levered. TRC is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with TRC, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

TRC’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, 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 TRC’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Tejon Ranch to get a better picture of the stock by looking at:


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.