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Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Public Joint Stock Company RussNeft (MISX:RNFT), with a market cap of RUРУБ150.00B, are often out of the spotlight. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Let’s take a look at RNFT’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into RNFT here. See our latest analysis for RussNeft
Does RNFT generate enough cash through operations?
Over the past year, RNFT has reduced its debt from RUРУБ178.94B to RUРУБ85.09B – this includes both the current and long-term debt. With this debt payback, RNFT’s cash and short-term investments stands at RUРУБ3.07B , ready to deploy into the business. Additionally, RNFT has produced cash from operations of RUРУБ27.32B during the same period of time, leading to an operating cash to total debt ratio of 32.11%, signalling that RNFT’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In RNFT’s case, it is able to generate 0.32x cash from its debt capital.
Can RNFT meet its short-term obligations with the cash in hand?
With current liabilities at RUРУБ52.15B, it appears that the company has not been able to meet these commitments with a current assets level of RUРУБ20.58B, leading to a 0.39x current account ratio. which is under the appropriate industry ratio of 3x.
Is RNFT’s debt level acceptable?
With total debt exceeding equities, RNFT is considered a highly levered company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether RNFT is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In RNFT’s, case, the ratio of 4.05x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.