Stocks with market capitalization between $2B and $10B, such as First Solar, Inc. (NASDAQ:FSLR) with a size of US$6.4b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Let’s take a look at FSLR’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of First Solar's financial health, so you should conduct further analysis into FSLR here.
FSLR’s Debt (And Cash Flows)
Over the past year, FSLR has maintained its debt levels at around US$476m which accounts for long term debt. At this current level of debt, FSLR's cash and short-term investments stands at US$2.5b to keep the business going. Moving on, operating cash flow was negative over the last twelve months. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of FSLR’s operating efficiency ratios such as ROA here.
Can FSLR pay its short-term liabilities?
With current liabilities at US$845m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 4.57x. The current ratio is calculated by dividing 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.
Does FSLR face the risk of succumbing to its debt-load?
FSLR’s level of debt is low relative to its total equity, at 9.1%. FSLR is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
FSLR’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for FSLR's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research First Solar to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FSLR’s future growth? Take a look at our free research report of analyst consensus for FSLR’s outlook.
- Valuation: What is FSLR 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 FSLR 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.