Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Altaba Inc (NASDAQ:AABA). With a market valuation of USD $62.57B, AABA 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 AABA to determine is solvency and liquidity and whether the stock is a sound investment. View our latest analysis for Altaba
Can AABA service its debt comfortably?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. AABA’s debt-to-equity ratio stands at 2.76%, which means debt is low and does not pose any significant threat to the company’s operations.
Does AABA generate an acceptable amount of cash through operations?
A basic way to evaluate AABA’s debt management is to see whether the cash flow generated from the business is at a relatively high level compared to the debt capital invested. This is also a test for whether AABA has the ability to repay its debt with cash from its business, which is less of a concern for large companies. In the case of AABA, operating cash flow over the past twelve months do cover its current debt,which means AABA generates enough money in a year through its operations to pay off its near-term debt. Hence, debt poses a virtually insignificant risk for the company.This is great news for both debtholders and shareholders, as the company exhibits cautious cash and debt management.
Are you a shareholder? AABA’s high cash coverage and low levels of debt indicate its ability to use its borrowings efficiently in order to produce a healthy cash flow. Given that AABA’s capital structure may differ over time, I encourage researching market expectations for AABA’s future growth on our free analysis platform.
Are you a potential investor? Although understanding the serviceability of debt is important when evaluating which companies are viable investments, it shouldn’t be the deciding factor. Ultimately, debt financing is an important source of funding for companies seeking to grow through new projects and investments. AABA’s Return on Capital Employed (ROCE) in order to see management’s track record at deploying funds in high-returning projects.
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.