Yahoo Finance What Investors Should Know About Energy Fuels Inc’s (TSE:EFR) Financial Strength
Investors are always looking for growth in small-cap stocks like Energy Fuels Inc (TSE:EFR), with a market cap of CA$356.6m. However, an important fact which most ignore is: how financially healthy is the business? Oil and Gas companies, in particular ones that run negative earnings, tend to be high risk. Assessing first and foremost the financial health is essential. Here are few basic financial health checks you should consider before taking the plunge. Nevertheless, this commentary is still very high-level, so I suggest you dig deeper yourself into EFR here.
How does EFR’s operating cash flow stack up against its debt?
Over the past year, EFR has reduced its debt from US$28.5m to US$24.7m , which comprises of short- and long-term debt. With this debt payback, EFR currently has US$43.2m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of EFR’s operating efficiency ratios such as ROA here.
Can EFR pay its short-term liabilities?
With current liabilities at US$9.7m, it seems that the business has been able to meet these obligations given the level of current assets of US$64.9m, with a current ratio of 6.7x. However, many consider anything above 3x to be quite high and could mean that EFR has too much idle capital in low-earning investments.
Does EFR face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 16.6%, EFR’s debt level may be seen as prudent. This range is considered safe as EFR is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. EFR’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.
Next Steps:
Although EFR’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how EFR has been performing in the past. I suggest you continue to research Energy Fuels to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for EFR’s future growth? Take a look at our free research report of analyst consensus for EFR’s outlook.
Valuation: What is EFR 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 EFR 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 editorial-team@simplywallst.com.
