Yahoo Finance Has Beach Energy Limited (ASX:BPT) Got Enough Cash?
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Stocks with market capitalization between $2B and $10B, such as Beach Energy Limited (ASX:BPT) with a size of AU$4.4b, do not attract as much attention from the investing community as do the small-caps and large-caps. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. BPT’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into BPT here.
Check out our latest analysis for Beach Energy
BPT’s Debt (And Cash Flows)
Over the past year, BPT has borrowed debt capital of around AU$521m accounting for long term debt. With this growth in debt, BPT's cash and short-term investments stands at AU$204m to keep the business going. Additionally, BPT has produced AU$968m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 186%, indicating that BPT’s operating cash is sufficient to cover its debt.
Can BPT pay its short-term liabilities?
With current liabilities at AU$676m, it appears that the company has been able to meet these obligations given the level of current assets of AU$969m, with a current ratio of 1.43x. The current ratio is the number you get when you divide current assets by current liabilities. For Oil and Gas companies, this ratio is within a sensible range since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does BPT face the risk of succumbing to its debt-load?
BPT’s level of debt is appropriate relative to its total equity, at 25%. This range is considered safe as BPT is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can test if BPT’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For BPT, the ratio of 17.59x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as BPT’s high interest coverage is seen as responsible and safe practice.
Next Steps:
BPT has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BPT's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Beach Energy to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BPT’s future growth? Take a look at our free research report of analyst consensus for BPT’s outlook.
Valuation: What is BPT 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 BPT 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.
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.
