Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Subsea 7 SA. (OB:SUBC), with a market cap of ØRE37.72B, are often out of the spotlight. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at SUBC’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 SUBC here. See our latest analysis for Subsea 7
How does SUBC’s operating cash flow stack up against its debt?
SUBC has shrunken its total debt levels in the last twelve months, from US$429.10M to US$284.50M , which is made up of current and long term debt. With this debt payback, the current cash and short-term investment levels stands at US$1.11B , ready to deploy into the business. On top of this, SUBC has generated cash from operations of US$209.30M during the same period of time, resulting in an operating cash to total debt ratio of 73.57%, signalling that SUBC’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In SUBC’s case, it is able to generate 0.74x cash from its debt capital.
Can SUBC meet its short-term obligations with the cash in hand?
Looking at SUBC’s most recent US$1.31B liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$2.18B, leading to a 1.67x current account ratio. Usually, for Energy Services companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does SUBC face the risk of succumbing to its debt-load?
With debt at 4.79% of equity, SUBC may be thought of as having low leverage. SUBC is not taking on too much debt commitment, which may be constraining for future growth.
SUBC has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, 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 SUBC has been performing in the past. I suggest you continue to research Subsea 7 to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SUBC’s future growth? Take a look at our free research report of analyst consensus for SUBC’s outlook.
- Valuation: What is SUBC 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 SUBC 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.