Stocks with market capitalization between $2B and $10B, such as Royal Gold Inc (NASDAQ:RGLD) with a size of US$5.78B, 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 both of those groups. Today we will look at RGLD’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into RGLD here. Check out our latest analysis for Royal Gold
Does RGLD generate enough cash through operations?
Over the past year, RGLD has maintained its debt levels at around US$586.17M comprising of short- and long-term debt. At this constant level of debt, RGLD currently has US$85.85M remaining in cash and short-term investments , ready to deploy into the business. Additionally, RGLD has produced cash from operations of US$265.88M during the same period of time, resulting in an operating cash to total debt ratio of 45.36%, meaning that RGLD’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires positive earnings. In RGLD’s case, it is able to generate 0.45x cash from its debt capital.
Can RGLD pay its short-term liabilities?
Looking at RGLD’s most recent US$30.86M liabilities, the company has been able to meet these commitments with a current assets level of US$140.18M, leading to a 4.54x current account ratio. Though, anything about 3x may be excessive, since RGLD may be leaving too much capital in low-earning investments.
Can RGLD service its debt comfortably?
With debt at 19.82% of equity, RGLD may be thought of as appropriately levered. RGLD is not taking on too much debt commitment, which may be constraining for future growth. RGLD’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.
RGLD has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how RGLD has been performing in the past. I suggest you continue to research Royal Gold to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RGLD’s future growth? Take a look at our free research report of analyst consensus for RGLD’s outlook.
- Valuation: What is RGLD 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 RGLD 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.