Mid-caps stocks, like Deckers Outdoor Corporation (NYSE:DECK) with a market capitalization of US$4.3b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Let’s take a look at DECK’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into DECK here.
Does DECK produce enough cash relative to debt?
Over the past year, DECK has maintained its debt levels at around US$32m – this includes long-term debt. At this constant level of debt, DECK currently has US$516m remaining in cash and short-term investments for investing into the business. Moreover, DECK has produced US$354m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 1118%, indicating that DECK’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In DECK’s case, it is able to generate 11.18x cash from its debt capital.
Can DECK meet its short-term obligations with the cash in hand?
With current liabilities at US$394m, the company has been able to meet these obligations given the level of current assets of US$1.2b, with a current ratio of 3.06x. However, a ratio greater than 3x may be considered by some to be quite high, however this is not necessarily a negative for the company.
Is DECK’s debt level acceptable?
With a debt-to-equity ratio of 3.1%, DECK’s debt level is relatively low. This range is considered safe as DECK is not taking on too much debt obligation, which may be constraining for future growth.
DECK’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, 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 DECK has been performing in the past. I recommend you continue to research Deckers Outdoor to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DECK’s future growth? Take a look at our free research report of analyst consensus for DECK’s outlook.
- Valuation: What is DECK 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 DECK is currently mispriced by the market.
- 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.
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