Is Peak Resources Limited’s (ASX:PEK) Balance Sheet A Threat To Its Future?

More

Can PEK service its debt comfortably?

PEK is a relatively highly levered company with a debt-to-equity of 40.49%. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since PEK is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

PEK’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 exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how PEK has been performing in the past. You should continue to research Peak Resources to get a better picture of the stock by looking at:

• 1. Valuation: What is PEK 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 PEK is currently mispriced by the market.
• 2. Historical Performance: What has PEK’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
• 3. 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.