What does PulteGroup Inc’s (NYSE:PHM) Balance Sheet Tell Us About Its Future?
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as PulteGroup Inc (NYSE:PHM), with a market cap of US$8.33B, often get neglected by retail investors. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine PHM’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into PHM here. View our latest analysis for PulteGroup
Does PHM generate enough cash through operations?
Over the past year, PHM has maintained its debt levels at around US$3.52B – this includes both the current and long-term debt. At this current level of debt, the current cash and short-term investment levels stands at US$278.67M , ready to deploy into the business. On top of this, PHM has generated US$663.08M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 18.84%, signalling that PHM’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In PHM’s case, it is able to generate 0.19x cash from its debt capital.
Does PHM’s liquid assets cover its short-term commitments?
At the current liabilities level of US$1.94B liabilities, the company has been able to meet these obligations given the level of current assets of US$8.75B, with a current ratio of 4.52x. Though, anything above 3x is considered high and could mean that PHM has too much idle capital in low-earning investments.
Can PHM service its debt comfortably?
With debt reaching 84.71% of equity, PHM may be thought of as relatively highly levered. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses.
Next Steps:
At its current level of cash flow coverage, PHM has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for PHM’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research PulteGroup to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PHM’s future growth? Take a look at our free research report of analyst consensus for PHM’s outlook.
Valuation: What is PHM 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 PHM 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.
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.
