Uh, arctic, when was the last time you checked out KEG's debt ratio?
A whopping 71%? Afraid it's more like a whopping 258%!! And KEG has very negative free cashflow as well (-1.5%).
I always look at debt/equity and FCFlow together, because they offset one another. It's no big deal if you have negative free cashflow but low debt, because you can always borrow to cover your free cashflow needs. It's no big deal if you have high debt but lots of free cashflow, because you can use that cash to pay off the debt.
But if you have high debt AND no free cashflow, AND the hard times come -- look out below!
At the moment, analysts are projecting an EPS increase for KEG next year, while projections for most other countries are down. So that's to the good (for KEG, that is).
However, looked at in the light of just the numbers on debt, free cashflow, and EPS projections, the future of some companies in the oil patch looks TRULY horrible. For example:
Parker Drilling
EPS current fiscal year: +60%
EPS projected next fiscal year: -80.4%
Debt/equity: 166.8%
Free Cashflow: -1.0
Hvide Marine
EPS current fiscal year: -17%
EPS projected next fiscal year: -38.2%
Debt/equity: 250.3%
Free Cashflow: -2.9
TIMBER-R-R-R-R-R!
Not necessarily, though. The market does not seem to care about such numbers. (What does it care about, anyway?)
Incidentally, for the record. In my last two posts, the phrase "EPS this year" meant EPS back a year from today. Current fiscal year numbers are different -- and lower.
Turns out, for example, that my virtuous TDW had growth rate decline this fiscal year, and the same is predicted for next fiscal year. :-(( But it has a lot of fat on its bones, and will probably still be around 100 years from now. And probably at the same price. <gg>
jbe |
