Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Qualys, Inc. (NASDAQ:QLYS), with a market cap of US$3.4b, often get neglected by retail investors. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine QLYS’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Qualys's financial health, so you should conduct further analysis into QLYS here.
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Does QLYS Produce Much Cash Relative To Its Debt?
QLYS has increased its debt level by about US$42m over the last 12 months – which includes long-term debt. With this growth in debt, QLYS's cash and short-term investments stands at US$298m to keep the business going. On top of this, QLYS has generated cash from operations of US$127m during the same period of time, resulting in an operating cash to total debt ratio of 304%, signalling that QLYS’s current level of operating cash is high enough to cover debt.
Does QLYS’s liquid assets cover its short-term commitments?
Looking at QLYS’s US$208m in current liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$383m, leading to a 1.84x current account ratio. The current ratio is calculated by dividing current assets by current liabilities. For Software companies, this ratio is within a sensible range since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can QLYS service its debt comfortably?
With a debt-to-equity ratio of 11%, QLYS's debt level may be seen as prudent. QLYS is not taking on too much debt commitment, which may be constraining for future growth.
QLYS has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how QLYS has been performing in the past. You should continue to research Qualys to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for QLYS’s future growth? Take a look at our free research report of analyst consensus for QLYS’s outlook.
- Valuation: What is QLYS 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 QLYS 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.