Mid-caps stocks, like Cameco Corporation (TSX:CCO) with a market capitalization of CA$5.04B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at CCO’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into CCO here. See our latest analysis for Cameco
Does CCO generate enough cash through operations?
CCO has sustained its debt level by about CA$1.49B over the last 12 months comprising of short- and long-term debt. At this stable level of debt, CCO’s cash and short-term investments stands at CA$591.62M for investing into the business. On top of this, CCO has produced cash from operations of CA$596.05M in the last twelve months, resulting in an operating cash to total debt ratio of 39.88%, meaning that CCO’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires a positive net income. In CCO’s case, it is able to generate 0.4x cash from its debt capital.
Can CCO meet its short-term obligations with the cash in hand?
Looking at CCO’s most recent CA$410.99M liabilities, it seems that the business has been able to meet these commitments with a current assets level of CA$2.14B, leading to a 5.2x current account ratio. However, a ratio greater than 3x may be considered as too high, as CCO could be holding too much capital in a low-return investment environment.
Can CCO service its debt comfortably?
CCO’s level of debt is appropriate relative to its total equity, at 30.75%. CCO is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with CCO, and the company has plenty of headroom and ability to raise debt should it need to in the future.
CCO’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven’t considered other factors such as how CCO has been performing in the past. I recommend you continue to research Cameco to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CCO’s future growth? Take a look at our free research report of analyst consensus for CCO’s outlook.
- Valuation: What is CCO 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 CCO 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.