Investors are always looking for growth in small-cap stocks like Noble Midstream Partners LP (NYSE:NBLX), with a market cap of US$1.79B. However, an important fact which most ignore is: how financially healthy is the business? Companies operating in the Oil and Gas industry, even ones that are profitable, are inclined towards being higher risk. Assessing first and foremost the financial health is vital. I believe these basic checks tell most of the story you need to know. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into NBLX here.
How does NBLX’s operating cash flow stack up against its debt?
Over the past year, NBLX has ramped up its debt from US$4.79M to US$88.14M , which comprises of short- and long-term debt. With this increase in debt, NBLX currently has US$18.03M remaining in cash and short-term investments , ready to deploy into the business. Moreover, NBLX has produced US$166.23M in operating cash flow 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 pay its short-term liabilities?
With current liabilities at US$114.39M, it seems that the business has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.75x, which is below the prudent industry ratio of 3x.
Does NBLX face the risk of succumbing to its debt-load?
With debt at 14.30% of equity, NBLX may be thought of as appropriately levered. NBLX is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
NBLX has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. But it is still important for shareholders to understand why the company isn’t increasing its cheaper cost of capital to fund future growth, especially if meeting short-term obligations could also bring about issues. This is only a rough assessment of financial health, and I’m sure NBLX has company-specific issues impacting its capital structure decisions. I suggest you continue to research Noble Midstream Partners to get a more holistic view of the stock by looking at:
- 1. 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.
- 2. 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.
- 3. 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.