What is March outlook for PrairieSky (CA:PSK)?

PSK Stock

CAD 20.95 0.03 0.14%

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PrairieSky Royalty is scheduled to announce its earnings today. While many traders are getting carried away by overanalyzing energy space, it is reasonable to recap PrairieSky Royalty as an investment alternative. What exactly are PrairieSky Royalty shareholders getting in March? Here we also measure the ability of PrairieSky Royalty to meet its long-term debt obligations, such as interest payments on debt, the final principal payment on the debt, and any other fixed obligations like lease payments.

Published over a month ago

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Reviewed by Michael Smolkin

The company has accumulated 644.3 M in total debt with debt to equity ratio (D/E) of 0.03, which may suggest PrairieSky Royalty is not taking enough advantage from borrowing. PrairieSky Royalty has a current ratio of 0.27, indicating that it has a negative working capital and may not be able to pay financial obligations in time and when they become due. Debt can assist PrairieSky Royalty until it has trouble settling it off, either with new capital or with free cash flow. So, PrairieSky Royalty's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like PrairieSky Royalty sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for PrairieSky to invest in growth at high rates of return. When we think about PrairieSky Royalty's use of debt, we should always consider it together with cash and equity.

What is March outlook for PrairieSky (CA:PSK)?

PrairieSky Royalty financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of PrairieSky Royalty, including all of PrairieSky Royalty's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of PrairieSky Royalty assets, the company is considered highly leveraged. Understanding the composition and structure of overall PrairieSky Royalty debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it.

Please read more on our technical analysis page.

How important is PrairieSky Royalty's Liquidity

PrairieSky Royalty financial leverage refers to using borrowed capital as a funding source to finance PrairieSky Royalty ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. PrairieSky Royalty financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between PrairieSky Royalty's total debt and its cash.

How does PrairieSky utilize its cash?

To perform a cash flow analysis of PrairieSky Royalty, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash PrairieSky Royalty is receiving and how much cash it distributes out in a given period. The PrairieSky Royalty cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

PrairieSky Royalty Net Cash Flow from Operations is very stable at the moment as compared to the past year. PrairieSky Royalty reported last year Net Cash Flow from Operations of 226.8 Million

Breaking it down a bit more

The entity reported the revenue of 308 M. Net Income was 123.3 M with profit before overhead, payroll, taxes, and interest of 290 M.

Over 3 percent roll up for PrairieSky Royalty. What does it mean for insiders?

Coefficient of variation is down to 1336.66. It may hint at a possible volatility decline. PrairieSky Royalty currently demonstrates below-average downside deviation. It has Information Ratio of 0.04 and Jensen Alpha of 0.11. However, we advise investors to further question PrairieSky Royalty expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure PrairieSky Royalty's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact PrairieSky Royalty's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Our Final Take On PrairieSky Royalty

Although some companies within the oil & gas e&p industry are still a little expensive, even after the recent corrections, PrairieSky Royalty may offer a potential longer-term growth to insiders. To conclude, as of the 6th of February 2023, our latest 90 days buy-or-sell advice on the firm is Strong Sell. We believe PrairieSky Royalty is overvalued with low chance of distress for the next two years.

Editorial Staff

Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of PrairieSky Royalty. Please refer to our Terms of Use for any information regarding our disclosure principles.

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