Are Newmark Group Inc’s (NASDAQ:NMRK) Interest Costs Too High?
Stocks with market capitalization between $2B and $10B, such as Newmark Group Inc (NASDAQ:NMRK) with a size of US$2.40B, do not attract as much attention from the investing community as do the small-caps and large-caps. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Today we will look at NMRK’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 NMRK here. View our latest analysis for Newmark Group
Does NMRK generate an acceptable amount of cash through operations?
NMRK has built up its total debt levels in the last twelve months, from US$257.97M to US$1.50B , which is made up of current and long term debt. With this rise in debt, NMRK’s cash and short-term investments stands at US$178.65M for investing into the business. Additionally, NMRK has generated US$852.22M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 56.77%, indicating that NMRK’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In NMRK’s case, it is able to generate 0.57x cash from its debt capital.
Does NMRK’s liquid assets cover its short-term commitments?
At the current liabilities level of US$782.59M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$825.10M, with a current ratio of 1.05x. For Real Estate companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is NMRK’s debt level acceptable?
With total debt exceeding equities, NMRK is considered a highly levered company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
NMRK’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Since there is also no concerns around NMRK’s liquidity needs, this may be its optimal capital structure for the time being. This is only a rough assessment of financial health, and I’m sure NMRK has company-specific issues impacting its capital structure decisions. I recommend you continue to research Newmark Group to get a better picture of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for NMRK’s future growth? Take a look at our free research report of analyst consensus for NMRK’s outlook.
Valuation: What is NMRK 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 NMRK 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.
