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What does Great Lakes Dredge & Dock Corporation’s (GLDD) Balance Sheet Tell Us Abouts Its Future?

Arjun Bhatia

While small-cap stocks, such as Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) with its market cap of USD $319.31M, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. There are always disruptions which destabilize an existing industry, in which most small-cap companies are the first casualties. Here are few basic financial health checks to judge whether a company fits the bill or there is an additional risk which you should consider before taking the plunge. Check out our latest analysis for Great Lakes Dredge & Dock

Does GLDD generate enough cash through operations?

NasdaqGS:GLDD Historical Debt Oct 31st 17

Unxpected adverse events, such as natural disasters and wars, can be a true test of a company’s capacity to meet its obligations. These adverse events bring devastation and yet does not absolve the company from its debt. Can GLDD pay off what it owes to its debtholder by using only cash from its operational activities? GLDD’s recent operating cash flow was 0.07 times its debt within the past year. This means what GLDD can generate on an annual basis only covers less than a tenth of what it actually owes its debtors in the near term, which raises a red flag.

Can GLDD pay its short-term liabilities?

What about its commitments to other stakeholders such as payments to suppliers and employees? In times of adverse events, GLDD may need to liquidate its short-term assets to pay these immediate obligations. We should examine if the company’s cash and short-term investment levels match its current liabilities. Our analysis shows that GLDD is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.

Can GLDD service its debt comfortably?

While ideally the debt-to equity ratio of a financially healthy company should be less than 40%, several factors such as industry life-cycle and economic conditions can result in a company raising a significant amount of debt. In the case of GLDD, the debt-to-equity ratio is over 100%, which indicates that the company is holding a high level of debt relative to its net worth. In the event of financial turmoil, the company may experience difficulty meeting interest and other debt obligations. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings at least three times its interest payments is considered financially sound. In GLDD’s case, its interest is not sufficiently covered by its profits as the ratio is 0.7x. This means lenders may refuse to lend the company more money, as it is seen as too risky in terms of default.

Next Steps:

Are you a shareholder? At its current level of cash flow coverage, GLDD has room for improvement to better cushion for events which may require debt repayment. Though, its high liquidity means the company should continue to operate smoothly in the case of adverse events. Given that its financial position may be different. I suggest researching market expectations for GLDD’s future growth on our free analysis platform.

Are you a potential investor? GLDD’s high debt level indicates room for improvement. Furthermore, its cash flow coverage of less than a quarter of debt means that operating efficiency could also be an issue. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I encourage you to continue your research by taking a look at GLDD’s past performance analysis on our free platform in order to determine for yourself whether its debt position is justified.


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.