Yahoo Finance What You Must Know About CVR Partners LP’s (NYSE:UAN) Financial Strength
CVR Partners LP (NYSE:UAN) is a small-cap stock with a market capitalization of US$345.51m. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? Given that UAN is not presently profitable, it’s vital to assess the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into UAN here.
How much cash does UAN generate through its operations?
Over the past year, UAN has maintained its debt levels at around US$625.90m – this includes both the current and long-term debt. At this current level of debt, the current cash and short-term investment levels stands at US$49.17m for investing into the business. Additionally, UAN has generated cash from operations of US$10.40m over the same time period, resulting in an operating cash to total debt ratio of 1.66%, indicating that UAN’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires a positive net income. In UAN’s case, it is able to generate 0.017x cash from its debt capital.
Does UAN’s liquid assets cover its short-term commitments?
Looking at UAN’s most recent US$56.10m liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.12x. For Chemicals companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does UAN face the risk of succumbing to its debt-load?
With total debt exceeding equities, UAN is considered a highly levered company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since UAN is presently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
UAN’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure UAN has company-specific issues impacting its capital structure decisions. You should continue to research CVR Partners to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for UAN’s future growth? Take a look at our free research report of analyst consensus for UAN’s outlook.
Valuation: What is UAN 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 UAN 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.
