Mid-caps stocks, like Borr Drilling Limited (OB:BDRILL) with a market capitalization of øre18.87b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. BDRILL’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into BDRILL here.
How does BDRILL’s operating cash flow stack up against its debt?
Over the past year, BDRILL has borrowed debt capital of around US$261.0m comprising of short- and long-term debt. With this increase in debt, BDRILL’s cash and short-term investments stands at US$51.5m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, 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 examine some of BDRILL’s operating efficiency ratios such as ROA here.
Does BDRILL’s liquid assets cover its short-term commitments?
At the current liabilities level of US$121.7m liabilities, the company has been able to meet these commitments with a current assets level of US$234.5m, leading to a 1.93x current account ratio. For Energy Services companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Does BDRILL face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 15.6%, BDRILL’s debt level may be seen as prudent. This range is considered safe as BDRILL is not taking on too much debt obligation, which may be constraining for future growth. BDRILL’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.
BDRILL’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure BDRILL has company-specific issues impacting its capital structure decisions. You should continue to research Borr Drilling to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BDRILL’s future growth? Take a look at our free research report of analyst consensus for BDRILL’s outlook.
- Historical Performance: What has BDRILL’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.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.