Has LogMeIn Inc (NASDAQ:LOGM) Got Enough Cash?
Mid-caps stocks, like LogMeIn Inc (NASDAQ:LOGM) with a market capitalization of US$6.15B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Today we will look at LOGM’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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into LOGM here. Check out our latest analysis for LogMeIn
Is LOGM’s debt level acceptable?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For LOGM, the debt-to-equity ratio is zero, meaning that the company has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with LOGM, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can LOGM meet its short-term obligations with the cash in hand?
Given zero long-term debt on its balance sheet, LogMeIn has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. At the current liabilities level of US$445.23M liabilities, the company is not able to meet these obligations given the level of current assets of US$398.82M, with a current ratio of 0.9x below the prudent level of 3x.
Next Steps:
Although LOGM has zero debt obligations, it still has short term liabilities such as salaries to pay. As shareholders, you should try and determine whether this strategy is justified for LOGM, especially when liquidity may also be an issue. I admit this is a fairly basic analysis for LOGM’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research LogMeIn to get a more holistic view of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for LOGM’s future growth? Take a look at our free research report of analyst consensus for LOGM’s outlook.
Valuation: What is LOGM 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 LOGM 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.
