Yahoo Finance What You Must Know About Civeo Corporation’s (NYSE:CVEO) Financial Strength
While small-cap stocks, such as Civeo Corporation (NYSE:CVEO) with its market cap of US$645.65m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since CVEO is loss-making right now, it’s crucial to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I recommend you dig deeper yourself into CVEO here.
How does CVEO’s operating cash flow stack up against its debt?
CVEO has shrunken its total debt levels in the last twelve months, from US$353.27m to US$294.59m , which is made up of current and long term debt. With this debt repayment, CVEO currently has US$32.65m remaining in cash and short-term investments , ready to deploy into the business. Additionally, CVEO has produced US$56.83m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 19.29%, indicating that CVEO’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable companies since metrics such as return on asset (ROA) requires positive earnings. In CVEO’s case, it is able to generate 0.19x cash from its debt capital.
Can CVEO meet its short-term obligations with the cash in hand?
With current liabilities at US$75.63m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.75x. Generally, for Commercial Services companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is CVEO’s debt level acceptable?
With a debt-to-equity ratio of 75.88%, CVEO can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since CVEO is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
At its current level of cash flow coverage, CVEO has room for improvement to better cushion for events which may require debt repayment. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how CVEO has been performing in the past. You should continue to research Civeo to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CVEO’s future growth? Take a look at our free research report of analyst consensus for CVEO’s outlook.
Valuation: What is CVEO 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 CVEO 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 pass 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.
