While small-cap stocks, such as Energy Fuels Inc (TSE:EFR) with its market cap of CA$208.96m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Oil and Gas companies, especially ones that are currently loss-making, are more likely to be higher risk. Evaluating financial health as part of your investment thesis is essential. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I recommend you dig deeper yourself into EFR here.
How does EFR’s operating cash flow stack up against its debt?
EFR has shrunken its total debt levels in the last twelve months, from CA$29.55m to CA$27.49m , which is made up of current and long term debt. With this reduction in debt, the current cash and short-term investment levels stands at CA$18.57m , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of EFR’s operating efficiency ratios such as ROA here.
Can EFR meet its short-term obligations with the cash in hand?
At the current liabilities level of CA$9.90m liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 4.36x. Though, a ratio greater than 3x may be considered as too high, as EFR could be holding too much capital in a low-return investment environment.
Is EFR’s debt level acceptable?EFR’s level of debt is appropriate relative to its total equity, at 22.02%. EFR is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for EFR, and the company also has the ability and headroom to increase debt if needed going forward.
Although EFR’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for EFR’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Energy Fuels to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EFR’s future growth? Take a look at our free research report of analyst consensus for EFR’s outlook.
- Valuation: What is EFR 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 EFR 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.