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Is Anixter International Inc’s (NYSE:AXE) Balance Sheet A Threat To Its Future?

Stocks with market capitalization between $2B and $10B, such as Anixter International Inc (NYSE:AXE) with a size of US$2.62B, do not attract as much attention from the investing community as do the small-caps and large-caps. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. This article will examine AXE’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into AXE here. Check out our latest analysis for Anixter International

How does AXE’s operating cash flow stack up against its debt?

AXE has shrunken its total debt levels in the last twelve months, from US$1.38B to US$1.25B – this includes both the current and long-term debt. With this debt payback, the current cash and short-term investment levels stands at US$116.00M for investing into the business. Moreover, AXE has produced cash from operations of US$183.80M in the last twelve months, resulting in an operating cash to total debt ratio of 14.73%, signalling that AXE’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In AXE’s case, it is able to generate 0.15x cash from its debt capital.

Can AXE pay its short-term liabilities?

At the current liabilities level of US$1.35B liabilities, the company has been able to meet these obligations given the level of current assets of US$2.83B, with a current ratio of 2.1x. For Electronic companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

NYSE:AXE Historical Debt Apr 26th 18
NYSE:AXE Historical Debt Apr 26th 18

Can AXE service its debt comfortably?

AXE is a relatively highly levered company with a debt-to-equity of 85.53%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether AXE is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In AXE’s, case, the ratio of 4.3x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving AXE ample headroom to grow its debt facilities.

Next Steps:

AXE’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Though, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how AXE has been performing in the past. You should continue to research Anixter International to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AXE’s future growth? Take a look at our free research report of analyst consensus for AXE’s outlook.

  2. Valuation: What is AXE 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 AXE is currently mispriced by the market.

  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.

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