Is Expeditors International of Washington, Inc.’s (NASDAQ:EXPD) Liquidity Good Enough?
Expeditors International of Washington, Inc. (NASDAQ:EXPD), a large-cap worth US$12b, comes to mind for investors seeking a strong and reliable stock investment. Most investors favour these big stocks due to their strong balance sheet and high market liquidity, meaning there are an abundance of stock in the public market available for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Today I will analyse the latest financial data for EXPD to determine is solvency and liquidity and whether the stock is a sound investment.
Check out our latest analysis for Expeditors International of Washington
Can EXPD service its debt comfortably?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. For Expeditors International of Washington, investors should not worry about its debt levels because the company has none! This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with EXPD, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can EXPD meet its short-term obligations with the cash in hand?
Since Expeditors International of Washington doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. Looking at EXPD’s US$1.4b in current liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$2.7b, leading to a 1.99x current account ratio. Generally, for Logistics companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Next Steps:
EXPD has zero debt as well as ample cash to cover its near-term commitments. Its strong balance sheet reduces risk for the company and shareholders. This is only a rough assessment of financial health, and I’m sure EXPD has company-specific issues impacting its capital structure decisions. I recommend you continue to research Expeditors International of Washington to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for EXPD’s future growth? Take a look at our free research report of analyst consensus for EXPD’s outlook.
Valuation: What is EXPD 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 EXPD 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
