Yahoo Finance All You Need To Know About Antofagasta plc’s (LON:ANTO) Financial Health
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With a market capitalization of UK£8.8b, Antofagasta plc (LON:ANTO) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high liquidity, which means there’s plenty of stocks available to the public for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Today I will analyse the latest financial data for ANTO to determine is solvency and liquidity and whether the stock is a sound investment.
View our latest analysis for Antofagasta
How much cash does ANTO generate through its operations?
Over the past year, ANTO has reduced its debt from US$3.0b to US$2.4b , which includes long-term debt. With this debt payback, the current cash and short-term investment levels stands at US$1.6b , ready to deploy into the business. Additionally, ANTO has produced US$1.7b in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 69%, meaning that ANTO’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In ANTO’s case, it is able to generate 0.69x cash from its debt capital.
Can ANTO meet its short-term obligations with the cash in hand?
At the current liabilities level of US$1.1b, it seems that the business has been able to meet these obligations given the level of current assets of US$2.9b, with a current ratio of 2.57x. Usually, for Metals and Mining 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.
Can ANTO service its debt comfortably?
With debt at 27% of equity, ANTO may be thought of as appropriately levered. ANTO is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether ANTO is able to meet its debt obligations by looking at the net interest coverage ratio. Net interest should be covered by earnings before interest and tax (EBIT) by at least three times to be safe. For ANTO, the ratio of 25.68x suggests that interest is comfortably covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes ANTO and other large-cap investments thought to be safe.
Next Steps:
ANTO’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for ANTO’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Antofagasta to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ANTO’s future growth? Take a look at our free research report of analyst consensus for ANTO’s outlook.
Valuation: What is ANTO 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 ANTO 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
