Yahoo Finance What You Should Know About Cub Energy Inc.'s (CVE:KUB) Financial Strength
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
While small-cap stocks, such as Cub Energy Inc. (CVE:KUB) with its market cap of CA$24m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Understanding the company's financial health becomes essential, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. We'll look at some basic checks that can form a snapshot the company’s financial strength. Nevertheless, this is just a partial view of the stock, and I suggest you dig deeper yourself into KUB here.
KUB’s Debt (And Cash Flows)
KUB's debt level has been constant at around US$7.5m over the previous year which accounts for long term debt. At this constant level of debt, KUB currently has US$7.0m remaining in cash and short-term investments to keep the business going. Moreover, KUB has produced cash from operations of US$887k during the same period of time, leading to an operating cash to total debt ratio of 12%, indicating that KUB’s debt is not covered by operating cash.
Can KUB pay its short-term liabilities?
Looking at KUB’s US$9.9m in current liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.01x. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Oil and Gas companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is KUB’s debt level acceptable?
With a debt-to-equity ratio of 75%, KUB can be considered as an above-average leveraged company. This is a bit unusual for a small-cap stock, since they generally have a harder time borrowing than large more established companies.
Next Steps:
KUB’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. Since there is also no concerns around KUB's liquidity needs, this may be its optimal capital structure for the time being. Keep in mind I haven't considered other factors such as how KUB has been performing in the past. I suggest you continue to research Cub Energy to get a better picture of the small-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for KUB’s future growth? Take a look at our free research report of analyst consensus for KUB’s outlook.
Historical Performance: What has KUB's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
