How Financially Strong Is Cerner Corporation (NASDAQ:CERN)?
Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Cerner Corporation (NASDAQ:CERN) a safer option. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. But, the health of the financials determines whether the company continues to succeed. Today we will look at Cerner’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into CERN here. Check out our latest analysis for Cerner
How does CERN’s operating cash flow stack up against its debt?
CERN’s debt levels have fallen from $605.2M to $563.7M over the last 12 months , which comprises of short- and long-term debt. With this debt payback, CERN currently has $356.4M remaining in cash and short-term investments for investing into the business. On top of this, CERN has generated $1,155.6M in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 204.99%, indicating that CERN’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In CERN’s case, it is able to generate 2.05x cash from its debt capital.
Does CERN’s liquid assets cover its short-term commitments?
With current liabilities at $845.4M, it appears that the company has been able to meet these obligations given the level of current assets of $1,619.4M, with a current ratio of 1.92x. For Healthcare Services companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Does CERN face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 11.72%, CERN’s debt level may be seen as prudent. CERN is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
CERN’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. This is only a rough assessment of financial health, and I’m sure CERN has company-specific issues impacting its capital structure decisions. You should continue to research Cerner to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CERN’s future growth? Take a look at our free research report of analyst consensus for CERN’s outlook.
2. Valuation: What is CERN 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 CERN 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.
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.
