How Financially Strong Is Zillow Group Inc (NASDAQ:ZG)?
Zillow Group Inc (NASDAQ:ZG), a large-cap worth US$11.89b, comes to mind for investors seeking a strong and reliable stock investment. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. However, the health of the financials determines whether the company continues to succeed. This article will examine Zillow Group’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into ZG here. See our latest analysis for Zillow Group
Does ZG produce enough cash relative to debt?
ZG has sustained its debt level by about US$385.42m over the last 12 months made up of current and long term debt. At this stable level of debt, the current cash and short-term investment levels stands at US$762.54m , ready to deploy into the business. On top of this, ZG has produced US$258.19m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 66.99%, meaning that ZG’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires positive earnings. In ZG’s case, it is able to generate 0.67x cash from its debt capital.
Does ZG’s liquid assets cover its short-term commitments?
At the current liabilities level of US$118.39m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 7.11x. However, anything about 3x may be excessive, since ZG may be leaving too much capital in low-earning investments.
Is ZG’s debt level acceptable?
With a debt-to-equity ratio of 14.07%, ZG’s debt level may be seen as prudent. ZG is not taking on too much debt commitment, which may be constraining for future growth. Risk around debt is very low for ZG, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
ZG’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. I admit this is a fairly basic analysis for ZG’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Zillow Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ZG’s future growth? Take a look at our free research report of analyst consensus for ZG’s outlook.
Valuation: What is ZG 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 ZG 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 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.
