While small-cap stocks, such as Noble Midstream Partners LP (NYSE:NBLX) with its market cap of US$1.98b, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Oil and Gas companies, even ones that are profitable, tend to be high risk. Assessing first and foremost the financial health is crucial. Here are few basic financial health checks you should consider before taking the plunge. Though, I know these factors are very high-level, so I suggest you dig deeper yourself into NBLX here.
How much cash does NBLX generate through its operations?
NBLX’s debt levels surged from US$4.79m to US$88.14m over the last 12 months , which is made up of current and long term debt. With this increase in debt, the current cash and short-term investment levels stands at US$18.03m for investing into the business. On top of this, NBLX has generated cash from operations of US$166.23m over the same time period, resulting in an operating cash to total debt ratio of 188.59%, indicating 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 1.89x cash from its debt capital.
Can NBLX meet its short-term obligations with the cash in hand?
With current liabilities at US$114.39m, it seems that the business has not been able to meet these commitments with a current assets level of US$86.10m, leading to a 0.75x current account ratio. which is under the appropriate industry ratio of 3x.
Does NBLX face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 41.72%, NBLX can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
NBLX’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. Keep in mind I haven’t considered other factors such as how NBLX has been performing in the past. I recommend 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 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.