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Has Exelixis, Inc. (NASDAQ:EXEL) Got Enough Cash?

Simply Wall St

Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Exelixis, Inc. (NASDAQ:EXEL), with a market cap of US$7.0b, 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. This article will examine EXEL’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into EXEL here.

View our latest analysis for Exelixis

EXEL’s Debt (And Cash Flows)

EXEL has sustained its debt level by about US$15m over the last 12 months which accounts for long term debt. At this current level of debt, EXEL currently has US$693m remaining in cash and short-term investments , ready to be used for running the business. Moreover, EXEL has produced US$416m in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 2778%, meaning that EXEL’s debt is appropriately covered by operating cash.

Can EXEL pay its short-term liabilities?

At the current liabilities level of US$105m, it appears that the company has been able to meet these commitments with a current assets level of US$897m, leading to a 8.5x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.

NasdaqGS:EXEL Historical Debt, April 15th 2019

Can EXEL service its debt comfortably?

With debt at 1.2% of equity, EXEL may be thought of as having low leverage. EXEL is not taking on too much debt commitment, which may be constraining for future growth.

Next Steps:

EXEL’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 proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I'm sure EXEL has company-specific issues impacting its capital structure decisions. I suggest you continue to research Exelixis to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for EXEL’s future growth? Take a look at our free research report of analyst consensus for EXEL’s outlook.
  2. Valuation: What is EXEL 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 EXEL is currently mispriced by the market.
  3. 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 editorial-team@simplywallst.com. 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.