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What does Coherent Inc’s (NASDAQ:COHR) Balance Sheet Tell Us About Its Future?

Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Coherent Inc (NASDAQ:COHR), with a market cap of US$6.02B, are often out of the spotlight. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Let’s take a look at COHR’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into COHR here. Check out our latest analysis for Coherent

Does COHR generate enough cash through operations?

COHR’s debt levels surged from US$20.00M to US$594.08M over the last 12 months , which is made up of current and long term debt. With this growth in debt, COHR’s cash and short-term investments stands at US$475.58M for investing into the business. On top of this, COHR has generated cash from operations of US$384.12M during the same period of time, resulting in an operating cash to total debt ratio of 64.66%, indicating that COHR’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In COHR’s case, it is able to generate 0.65x cash from its debt capital.

Can COHR pay its short-term liabilities?

At the current liabilities level of US$419.15M liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$1.31B, leading to a 3.13x current account ratio. Though, anything above 3x is considered high and could mean that COHR has too much idle capital in low-earning investments.

NasdaqGS:COHR Historical Debt Feb 7th 18
NasdaqGS:COHR Historical Debt Feb 7th 18

Does COHR face the risk of succumbing to its debt-load?

COHR is a relatively highly levered company with a debt-to-equity of 51.07%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether COHR 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 COHR’s, case, the ratio of 11.4x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as COHR’s high interest coverage is seen as responsible and safe practice.

Next Steps:

Although COHR’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around COHR’s liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for COHR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Coherent to get a more holistic view of the mid-cap by looking at:


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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