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Stocks with market capitalization between $2B and $10B, such as Everbridge, Inc. (NASDAQ:EVBG) with a size of US$3.0b, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. EVBG’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into EVBG here.
Does EVBG Produce Much Cash Relative To Its Debt?
EVBG has built up its total debt levels in the last twelve months, from US$91m to US$112m , which includes long-term debt. With this growth in debt, EVBG currently has US$258m remaining in cash and short-term investments to keep the business going. Moreover, EVBG has generated cash from operations of US$4.5m during the same period of time, resulting in an operating cash to total debt ratio of 4.0%, signalling that EVBG’s current level of operating cash is not high enough to cover debt.
Can EVBG pay its short-term liabilities?
With current liabilities at US$129m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.42x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Software companies, this is a suitable ratio since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is EVBG’s debt level acceptable?
EVBG is a relatively highly levered company with a debt-to-equity of 52%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since EVBG is currently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
EVBG’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. I admit this is a fairly basic analysis for EVBG's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Everbridge to get a more holistic view of the mid-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EVBG’s future growth? Take a look at our free research report of analyst consensus for EVBG’s outlook.
- Valuation: What is EVBG 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 EVBG 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.