Public Joint Stock Company Magnitogorsk Iron & Steel Works (MCX:MAGN): Financial Strength Analysis

Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Public Joint Stock Company Magnitogorsk Iron & Steel Works (MCX:MAGN), with a market cap of RUруб504b, often get neglected by retail investors. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. MAGN’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. Don’t forget that this is a general and concentrated examination of Magnitogorsk Iron & Steel Works’s financial health, so you should conduct further analysis into MAGN here.

See our latest analysis for Magnitogorsk Iron & Steel Works

Does MAGN Produce Much Cash Relative To Its Debt?

MAGN’s debt level has been constant at around US$536m over the previous year which accounts for long term debt. At this constant level of debt, MAGN’s cash and short-term investments stands at US$746m to keep the business going. Additionally, MAGN has produced US$1.9b in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 352%, meaning that MAGN’s operating cash is sufficient to cover its debt.

Can MAGN pay its short-term liabilities?

At the current liabilities level of US$1.4b, it appears that the company has been able to meet these obligations given the level of current assets of US$2.7b, with a current ratio of 1.95x. The current ratio is calculated by dividing current assets by current liabilities. For Metals and Mining companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.

MISX:MAGN Historical Debt, April 9th 2019
MISX:MAGN Historical Debt, April 9th 2019

Is MAGN’s debt level acceptable?

With debt at 11% of equity, MAGN may be thought of as appropriately levered. MAGN is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether MAGN is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In MAGN’s, case, the ratio of 141x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

MAGN’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, 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 MAGN has been performing in the past. I suggest you continue to research Magnitogorsk Iron & Steel Works to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MAGN’s future growth? Take a look at our free research report of analyst consensus for MAGN’s outlook.
  2. Valuation: What is MAGN 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 MAGN is currently mispriced by the market.
  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.

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 editorial-team@simplywallst.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.