How Financially Strong Is Albert Mining Inc (CVE:AIIM)?

Albert Mining Inc (CVE:AIIM), which has zero-debt on its balance sheet, can maximize capital returns by increasing debt due to its lower cost of capital. However, the trade-off is AIIM will have to follow strict debt obligations which will reduce its financial flexibility. While AIIM has no debt on its balance sheet, it doesn’t necessarily mean it exhibits financial strength. I will go over a basic overview of the stock’s financial health, which I believe provides a ballpark estimate of their financial health status.

View our latest analysis for Albert Mining

Is AIIM growing fast enough to value financial flexibility over lower cost of capital?

Debt funding can be cheaper than issuing new equity due to lower interest cost on debt. However, the trade-off is debtholders’ higher claim on company assets in the event of liquidation and stringent obligations around capital management. AIIM’s absence of debt on its balance sheet may be due to lack of access to cheaper capital, or it may simply believe low cost is not worth sacrificing financial flexibility. However, choosing flexibility over capital returns is logical only if it’s a high-growth company.

TSXV:AIIM Historical Debt November 1st 18
TSXV:AIIM Historical Debt November 1st 18

Can AIIM pay its short-term liabilities?

Since Albert Mining doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at CA$95k, it seems that the business has been able to meet these commitments with a current assets level of CA$387k, leading to a 4.06x current account ratio. However, a ratio greater than 3x may be considered as quite high.

Next Steps:

Having no debt on the books means AIIM has more financial freedom to keep growing at its current fast rate. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Moving forward, its financial position may change. I admit this is a fairly basic analysis for AIIM’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Albert Mining to get a better picture of the stock by looking at:

  1. Historical Performance: What has AIIM’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.
  2. 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.