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How Financially Strong Is Flowers Foods Inc (NYSE:FLO)?

Thomas Auclair

Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Flowers Foods Inc (NYSE:FLO) with a market-capitalization of US$4.28B, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine FLO’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 FLO here. View our latest analysis for Flowers Foods

Does FLO generate enough cash through operations?

FLO’s debt levels have fallen from US$978.06M to US$837.94M over the last 12 months – this includes both the current and long-term debt. With this reduction in debt, FLO currently has US$5.13M remaining in cash and short-term investments , ready to deploy into the business. Moreover, FLO has generated cash from operations of US$297.39M over the same time period, leading to an operating cash to total debt ratio of 35.49%, indicating that FLO’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 FLO’s case, it is able to generate 0.35x cash from its debt capital.

Can FLO meet its short-term obligations with the cash in hand?

Looking at FLO’s most recent US$393.95M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.29x. For Food companies, this ratio is within a sensible range since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

NYSE:FLO Historical Debt Jun 16th 18

Is FLO’s debt level acceptable?

FLO is a relatively highly levered company with a debt-to-equity of 64.59%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In FLO’s case, the ratio of 26.91x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving FLO ample headroom to grow its debt facilities.

Next Steps:

Although FLO’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. 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 FLO’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Flowers Foods to get a more holistic view of the mid-cap by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for FLO’s future growth? Take a look at our free research report of analyst consensus for FLO’s outlook.
  2. Valuation: What is FLO 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 FLO 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.