Yahoo Finance Has Parex Resources Inc. (TSE:PXT) Got Enough Cash?
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Stocks with market capitalization between $2B and $10B, such as Parex Resources Inc. (TSE:PXT) with a size of CA$3.1b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at PXT’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 PXT here.
See our latest analysis for Parex Resources
Does PXT face the risk of succumbing to its debt-load?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. The good news for investors is that Parex Resources has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with PXT, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can PXT pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Parex Resources has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at US$395m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.36x. Usually, for Oil and Gas companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
PXT has zero-debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, though, some level of debt may also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for PXT’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Parex Resources to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PXT’s future growth? Take a look at our free research report of analyst consensus for PXT’s outlook.
Valuation: What is PXT 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 PXT 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.
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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. On rare occasion, data errors may occur. Thank you for reading.
