Yahoo Finance Is Patterson-UTI Energy, Inc.'s (NASDAQ:PTEN) Liquidity Good Enough?
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Patterson-UTI Energy, Inc. (NASDAQ:PTEN) with a market-capitalization of US$3.2b, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. PTEN’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into PTEN here.
Check out our latest analysis for Patterson-UTI Energy
PTEN’s Debt (And Cash Flows)
PTEN has built up its total debt levels in the last twelve months, from US$867m to US$1.1b – this includes long-term debt. With this growth in debt, PTEN currently has US$245m remaining in cash and short-term investments , ready to be used for running the business. Moreover, PTEN has produced US$731m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 65%, signalling that PTEN’s debt is appropriately covered by operating cash.
Does PTEN’s liquid assets cover its short-term commitments?
With current liabilities at US$526m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.81x. The current ratio is calculated by dividing current assets by current liabilities. Generally, for Energy Services companies, this is a reasonable ratio as there's enough of a cash buffer without holding too much capital in low return investments.
Does PTEN face the risk of succumbing to its debt-load?
With debt at 32% of equity, PTEN may be thought of as appropriately levered. This range is considered safe as PTEN is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors' risk associated with debt is very low with PTEN, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
PTEN has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how PTEN has been performing in the past. You should continue to research Patterson-UTI Energy to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PTEN’s future growth? Take a look at our free research report of analyst consensus for PTEN’s outlook.
Valuation: What is PTEN 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 PTEN 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. Thank you for reading.
