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Hunter Group ASA (OB:HUNT) is a small-cap stock with a market capitalization of ØRE313.47M. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Energy Services companies, in particular ones that run negative earnings, tend to be high risk. So, understanding the company’s financial health becomes vital. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Nevertheless, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into HUNT here.
How does HUNT’s operating cash flow stack up against its debt?
HUNT has built up its total debt levels in the last twelve months, from ØRE6.89M to ØRE15.30M – this includes both the current and long-term debt. With this growth in debt, the current cash and short-term investment levels stands at ØRE279.46M , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of HUNT’s operating efficiency ratios such as ROA here.
Can HUNT meet its short-term obligations with the cash in hand?
Looking at HUNT’s most recent ØRE22.21M liabilities, the company has been able to meet these commitments with a current assets level of ØRE325.77M, leading to a 14.67x current account ratio. Though, anything above 3x is considered high and could mean that HUNT has too much idle capital in low-earning investments.
Is HUNT’s debt level acceptable?
With a debt-to-equity ratio of 3.69%, HUNT’s debt level is relatively low. HUNT is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is extremely low for HUNT, and the company also has the ability and headroom to increase debt if needed going forward.
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HUNT’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how HUNT has been performing in the past. I suggest you continue to research Hunter Group to get a better picture of the stock by looking at: