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Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Portland General Electric Company (NYSE:POR), with a market cap of US$4.3b, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Let’s take a look at POR’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into POR here.
How much cash does POR generate through its operations?
POR has sustained its debt level by about US$2.4b over the last 12 months which accounts for long term debt. At this current level of debt, POR’s cash and short-term investments stands at US$200m , ready to deploy into the business. On top of this, POR has produced cash from operations of US$614m over the same time period, leading to an operating cash to total debt ratio of 25%, signalling that POR’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In POR’s case, it is able to generate 0.25x cash from its debt capital.
Can POR meet its short-term obligations with the cash in hand?
Looking at POR’s US$703m in current liabilities, the company may not have an easy time meeting these commitments with a current assets level of US$631m, leading to a current ratio of 0.9x.
Can POR service its debt comfortably?
POR is a relatively highly levered company with a debt-to-equity of 98%. 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 POR’s case, the ratio of 2.91x suggests that interest is not strongly covered, which means that lenders may be more reluctant to lend out more funding as POR’s low interest coverage already puts the company at higher risk of default.
POR’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. But, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for POR’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Portland General Electric to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for POR’s future growth? Take a look at our free research report of analyst consensus for POR’s outlook.
- Valuation: What is POR 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 POR 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.
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 firstname.lastname@example.org.