Stocks with market capitalization between $2B and $10B, such as FLIR Systems Inc (NASDAQ:FLIR) with a size of US$7.23B, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Today we will look at FLIR’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into FLIR here. View our latest analysis for FLIR Systems
Does FLIR generate enough cash through operations?
FLIR’s debt levels have fallen from US$516.92M to US$420.68M over the last 12 months , which comprises of short- and long-term debt. With this debt repayment, FLIR currently has US$519.09M remaining in cash and short-term investments , ready to deploy into the business. Moreover, FLIR has produced cash from operations of US$308.25M during the same period of time, resulting in an operating cash to total debt ratio of 73.27%, signalling that FLIR’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In FLIR’s case, it is able to generate 0.73x cash from its debt capital.
Can FLIR meet its short-term obligations with the cash in hand?
Looking at FLIR’s most recent US$394.93M liabilities, the company has been able to meet these obligations given the level of current assets of US$1.39B, with a current ratio of 3.51x. Though, anything about 3x may be excessive, since FLIR may be leaving too much capital in low-earning investments.
Is FLIR’s debt level acceptable?
FLIR’s level of debt is appropriate relative to its total equity, at 22.93%. FLIR is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether FLIR is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In FLIR’s, case, the ratio of 20.89x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as FLIR’s high interest coverage is seen as responsible and safe practice.
FLIR has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for FLIR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research FLIR Systems to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FLIR’s future growth? Take a look at our free research report of analyst consensus for FLIR’s outlook.
- Valuation: What is FLIR 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 FLIR 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.