Yahoo Finance Does Teck Resources Limited’s (TSE:TECK.B) Debt Level Pose A Problem?
Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Teck Resources Limited (TSX:TECK.B) a safer option. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. However, its financial health remains the key to continued success. This article will examine Teck Resources’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 TECK.B here. Check out our latest analysis for Teck Resources
How much cash does TECK.B generate through its operations?
TECK.B’s debt levels have fallen from CA$8.34B to CA$6.37B over the last 12 months , which comprises of short- and long-term debt. With this reduction in debt, TECK.B’s cash and short-term investments stands at CA$952.00M , ready to deploy into the business. Additionally, TECK.B has generated CA$5.07B in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 79.54%, indicating that TECK.B’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In TECK.B’s case, it is able to generate 0.8x cash from its debt capital.
Does TECK.B’s liquid assets cover its short-term commitments?
Looking at TECK.B’s most recent CA$2.64B liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.81x. 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.
Is TECK.B’s debt level acceptable?
TECK.B’s level of debt is appropriate relative to its total equity, at 31.24%. TECK.B is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
TECK.B’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how TECK.B has been performing in the past. I suggest you continue to research Teck Resources to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TECK.B’s future growth? Take a look at our free research report of analyst consensus for TECK.B’s outlook.
Valuation: What is TECK.B 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 TECK.B 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.
