While small-cap stocks, such as Oryx Petroleum Corporation Limited (TSX:OXC) with its market cap of CA$103.15M, 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, in particular ones that run negative earnings, are inclined towards being higher risk. So, understanding the company’s financial health becomes vital. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I suggest you dig deeper yourself into OXC here.
Does OXC generate an acceptable amount of cash through operations?
Over the past year, OXC has reduced its debt from US$108.76M to US$75.85M , which is made up of current and long term debt. With this debt repayment, the current cash and short-term investment levels stands at US$38.84M , 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. For this article’s sake, I won’t be looking at this today, but you can assess some of OXC’s operating efficiency ratios such as ROA here.
Can OXC meet its short-term obligations with the cash in hand?
At the current liabilities level of US$42.58M liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$69.72M, leading to a 1.64x current account ratio. For Oil and Gas companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can OXC service its debt comfortably?With a debt-to-equity ratio of 13.68%, OXC’s debt level may be seen as prudent. OXC is not taking on too much debt commitment, which may be constraining for future growth. OXC’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
OXC’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for OXC’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Oryx Petroleum to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for OXC’s future growth? Take a look at our free research report of analyst consensus for OXC’s outlook.
- 2. Historical Performance: What has OXC’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.
- 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.