Yahoo Finance What does Range Resources Corporation’s (NYSE:RRC) Balance Sheet Tell Us About Its Future?
Stocks with market capitalization between $2B and $10B, such as Range Resources Corporation (NYSE:RRC) with a size of US$4.11b, 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. Today we will look at RRC’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into RRC here. View out our latest analysis for Range Resources
How does RRC’s operating cash flow stack up against its debt?
RRC’s debt levels surged from US$3.77b to US$4.11b over the last 12 months , which is made up of current and long term debt. With this increase in debt, RRC currently has US$448.00k remaining in cash and short-term investments for investing into the business. Additionally, RRC has produced cash from operations of US$816.25m during the same period of time, resulting in an operating cash to total debt ratio of 19.87%, indicating that RRC’s operating cash is not sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In RRC’s case, it is able to generate 0.2x cash from its debt capital.
Can RRC meet its short-term obligations with the cash in hand?
With current liabilities at US$755.47m, the company has not been able to meet these commitments with a current assets level of US$429.23m, leading to a 0.57x current account ratio. which is under the appropriate industry ratio of 3x.
Is RRC’s debt level acceptable?
RRC is a relatively highly levered company with a debt-to-equity of 69.96%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether RRC 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 RRC’s, case, the ratio of 0.61x suggests that interest is not strongly covered, which means that debtors may be less inclined to loan the company more money, reducing its headroom for growth through debt.
Next Steps:
RRC’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Furthermore, its lack of liquidity raises questions over current asset management practices for the mid-cap. This is only a rough assessment of financial health, and I’m sure RRC has company-specific issues impacting its capital structure decisions. You should continue to research Range Resources to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RRC’s future growth? Take a look at our free research report of analyst consensus for RRC’s outlook.
Valuation: What is RRC 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 RRC 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.
