Yahoo Finance What You Must Know About CNOOC Limited’s (HKG:883) Financial Health
Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider CNOOC Limited (HKG:883). With a market valuation of HK$543b, 883 is a safe haven in times of market uncertainty due to its strong balance sheet. 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 883 to determine is solvency and liquidity and whether the stock is a sound investment.
See our latest analysis for CNOOC
How does 883’s operating cash flow stack up against its debt?
883’s debt levels have fallen from CN¥146b to CN¥134b over the last 12 months , which includes long-term debt. With this debt payback, 883 currently has CN¥141b remaining in cash and short-term investments , ready to deploy into the business. On top of this, 883 has produced CN¥104b in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 78%, meaning that 883’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 883’s case, it is able to generate 0.78x cash from its debt capital.
Does 883’s liquid assets cover its short-term commitments?
At the current liabilities level of CN¥69b, it seems that the business has been able to meet these obligations given the level of current assets of CN¥181b, with a current ratio of 2.63x. Generally, for Oil and Gas 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 883’s debt level acceptable?
With debt at 34% of equity, 883 may be thought of as appropriately levered. 883 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
883’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. This is only a rough assessment of financial health, and I’m sure 883 has company-specific issues impacting its capital structure decisions. You should continue to research CNOOC to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 883’s future growth? Take a look at our free research report of analyst consensus for 883’s outlook.
Valuation: What is 883 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 883 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.
