Yahoo Finance Is Chicago Bridge & Iron Company NV. (NYSE:CBI) A Financially Sound Company?
While small-cap stocks, such as Chicago Bridge & Iron Company NV. (NYSE:CBI) with its market cap of US$1.68B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since CBI is loss-making right now, it’s essential to assess the current state of its operations and pathway to profitability. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into CBI here.
How does CBI’s operating cash flow stack up against its debt?
CBI has shrunken its total debt levels in the last twelve months, from US$2.74B to US$2.57B , which comprises of short- and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$354.64M for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of CBI’s operating efficiency ratios such as ROA here.
Can CBI pay its short-term liabilities?
Looking at CBI’s most recent US$5.26B liabilities, it appears that the company is not able to meet these obligations given the level of current assets of US$1.83B, with a current ratio of 0.35x below the prudent level of 3x.
Does CBI face the risk of succumbing to its debt-load?
With total debt exceeding equities, CBI is considered a highly levered company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since CBI is currently unprofitable, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
With a high level of debt on its balance sheet, CBI could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for CBI to increase its operational efficiency. In addition to this, its lack of liquidity raises questions over current asset management practices for the small-cap. I admit this is a fairly basic analysis for CBI’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Chicago Bridge & Iron to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CBI’s future growth? Take a look at our free research report of analyst consensus for CBI’s outlook.
Valuation: What is CBI 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 CBI 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 pass 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.
