In This Article:
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as TechnipFMC plc (NYSE:FTI), with a market capitalization of US$9.4b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine FTI’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into FTI here.
View our latest analysis for TechnipFMC
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
Does FTI produce enough cash relative to debt?
FTI’s debt levels surged from US$3.6b to US$4.1b over the last 12 months , which includes long-term debt. With this increase in debt, FTI’s cash and short-term investments stands at US$5.6b , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of FTI’s operating efficiency ratios such as ROA here.
Does FTI’s liquid assets cover its short-term commitments?
With current liabilities at US$8.7b, it seems that the business has been able to meet these obligations given the level of current assets of US$12b, with a current ratio of 1.33x. Generally, for Energy Services companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Does FTI face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 32%, FTI’s debt level may be seen as prudent. FTI is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can check to see whether FTI 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 FTI’s, case, the ratio of 3.77x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as FTI’s high interest coverage is seen as responsible and safe practice.