Stocks with market capitalization between $2B and $10B, such as Motor Oil (Hellas) Corinth Refineries S.A. (ATH:MOH) with a size of €2.2b, do not attract as much attention from the investing community as do the small-caps and large-caps. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Let’s take a look at MOH’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Motor Oil (Hellas) Corinth Refineries’s financial health, so you should conduct further analysis into MOH here.
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MOH’s Debt (And Cash Flows)
MOH has shrunk its total debt levels in the last twelve months, from €994m to €930m , which includes long-term debt. With this debt payback, MOH currently has €679m remaining in cash and short-term investments to keep the business going. On top of this, MOH has generated €326m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 35%, signalling that MOH’s operating cash is sufficient to cover its debt.
Does MOH’s liquid assets cover its short-term commitments?
At the current liabilities level of €834m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.98x. The current ratio is calculated by dividing current assets by current liabilities. Usually, for Oil and Gas companies, this is a suitable ratio since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can MOH service its debt comfortably?
MOH is a relatively highly levered company with a debt-to-equity of 84%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In MOH’s case, the ratio of 9.56x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving MOH ample headroom to grow its debt facilities.
Although MOH’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around MOH’s liquidity needs, this may be its optimal capital structure for the time being. Keep in mind I haven’t considered other factors such as how MOH has been performing in the past. I recommend you continue to research Motor Oil (Hellas) Corinth Refineries to get a better picture of the mid-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MOH’s future growth? Take a look at our free research report of analyst consensus for MOH’s outlook.
- Valuation: What is MOH 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 MOH 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.