Stocks with market capitalization between $2B and $10B, such as Public Joint Stock Company Uralkali (MISX:URKA) with a size of RUРУБ133.92B, 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. This article will examine URKA’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending 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 URKA here. Check out our latest analysis for Uralkali
Does URKA generate an acceptable amount of cash through operations?
Over the past year, URKA has maintained its debt levels at around US$7.28B – this includes both the current and long-term debt. At this current level of debt, URKA’s cash and short-term investments stands at US$1.55B , ready to deploy into the business. Moreover, URKA has generated US$1.01B in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 13.90%, signalling that URKA’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In URKA’s case, it is able to generate 0.14x cash from its debt capital.
Can URKA meet its short-term obligations with the cash in hand?
With current liabilities at US$2.33B, it appears that the company has not been able to meet these commitments with a current assets level of US$2.04B, leading to a 0.87x current account ratio. which is under the appropriate industry ratio of 3x.
Is URKA’s debt level acceptable?
URKA is a highly-leveraged company with debt exceeding equity by over 100%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. 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 URKA’s case, the ratio of 4.89x suggests that interest is appropriately 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.
URKA’s high debt levels is not met with high cash flow coverage. This leaves room for improvement in terms of debt management and operational efficiency. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. This is only a rough assessment of financial health, and I’m sure URKA has company-specific issues impacting its capital structure decisions. I suggest you continue to research Uralkali to get a more holistic view of the stock by looking at:
- Valuation: What is URKA 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 URKA is currently mispriced by the market.
- Historical Performance: What has URKA’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.