Mid-caps stocks, like Pivotal Software Inc (NYSE:PVTL) with a market capitalization of US$3.94B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Today we will look at PVTL’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into PVTL here. Check out our latest analysis for Pivotal Software
Does PVTL generate enough cash through operations?
Over the past year, PVTL has borrowed debt capital of around US$20.00M comprising of short- and long-term debt. With this growth in debt, PVTL’s cash and short-term investments stands at US$73.01M for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of PVTL’s operating efficiency ratios such as ROA here.
Does PVTL’s liquid assets cover its short-term commitments?
Looking at PVTL’s most recent US$360.11M liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$366.73M, leading to a 1.02x current account ratio. Usually, for Software companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does PVTL face the risk of succumbing to its debt-load?
With debt at 2.83% of equity, PVTL may be thought of as having low leverage. PVTL is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is extremely low for PVTL, and the company also has the ability and headroom to increase debt if needed going forward.
PVTL’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 exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how PVTL has been performing in the past. I suggest you continue to research Pivotal Software to get a better picture of the stock by looking at:
- Historical Performance: What has PVTL’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.