Is Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft's (VIE:SBO) Balance Sheet Strong Enough To Weather A Storm?

While small-cap stocks, such as Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft (WBAG:SBO) with its market cap of €1.41B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Energy Services industry, in particular ones that run negative earnings, tend to be high risk. Assessing first and foremost the financial health is crucial. 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 recommend you dig deeper yourself into SBO here.

Does SBO generate enough cash through operations?

SBO has built up its total debt levels in the last twelve months, from €170.10M to €244.45M – this includes both the current and long-term debt. With this rise in debt, SBO currently has €193.45M remaining in cash and short-term investments for investing into the business. Moreover, SBO has produced €31.26M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 12.79%, signalling that SBO’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires positive earnings. In SBO’s case, it is able to generate 0.13x cash from its debt capital.

Can SBO meet its short-term obligations with the cash in hand?

Looking at SBO’s most recent €107.98M liabilities, the company has been able to meet these commitments with a current assets level of €367.97M, leading to a 3.41x current account ratio. Though, a ratio greater than 3x may be considered as too high, as SBO could be holding too much capital in a low-return investment environment.

Can SBO service its debt comfortably?

With debt reaching 80.64% of equity, SBO may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since SBO is presently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

SBO’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for SBO's financial health. Other important fundamentals need to be considered alongside. You should continue to research Schoeller-Bleckmann Oilfield Equipment to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for SBO’s future growth? Take a look at our free research report of analyst consensus for SBO’s outlook.
• 2. Valuation: What is SBO 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 SBO is currently mispriced by the market.
• 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.