Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like OceanaGold Corporation (TSE:OGC), with a market cap of CA$2.7b, are often out of the spotlight. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. OGC’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into OGC here.
Does OGC Produce Much Cash Relative To Its Debt?
OGC has shrunk its total debt levels in the last twelve months, from US$240m to US$177m , which includes long-term debt. With this reduction in debt, OGC currently has US$108m remaining in cash and short-term investments , ready to be used for running the business. On top of this, OGC has generated cash from operations of US$346m during the same period of time, leading to an operating cash to total debt ratio of 196%, indicating that OGC’s current level of operating cash is high enough to cover debt.
Can OGC pay its short-term liabilities?
With current liabilities at US$183m, it seems that the business has been able to meet these obligations given the level of current assets of US$252m, with a current ratio of 1.38x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Metals and Mining companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can OGC service its debt comfortably?
With a debt-to-equity ratio of 11%, OGC’s debt level may be seen as prudent. This range is considered safe as OGC is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can test if OGC’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For OGC, the ratio of 11.4x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
OGC has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for OGC’s financial health. Other important fundamentals need to be considered alongside. You should continue to research OceanaGold to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for OGC’s future growth? Take a look at our free research report of analyst consensus for OGC’s outlook.
- Valuation: What is OGC 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 OGC 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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