Is Quidel Corporation’s (NASDAQ:QDEL) Liquidity Good Enough?
Stocks with market capitalization between $2B and $10B, such as Quidel Corporation (NASDAQ:QDEL) with a size of US$2.53b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. QDEL’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into QDEL here.
See our latest analysis for Quidel
How much cash does QDEL generate through its operations?
Over the past year, QDEL has reduced its debt from US$151.1m to US$134.4m , which comprises of short- and long-term debt. With this reduction in debt, QDEL’s cash and short-term investments stands at US$38.7m for investing into the business. Moreover, QDEL has generated cash from operations of US$90.2m in the last twelve months, leading to an operating cash to total debt ratio of 67.1%, indicating that QDEL’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In QDEL’s case, it is able to generate 0.67x cash from its debt capital.
Can QDEL pay its short-term liabilities?
With current liabilities at US$152.3m, it appears that the company has been able to meet these commitments with a current assets level of US$168.0m, leading to a 1.1x current account ratio. Generally, for Medical Equipment companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can QDEL service its debt comfortably?
With debt at 36.4% of equity, QDEL may be thought of as appropriately levered. QDEL is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether QDEL 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 QDEL’s, case, the ratio of 3.26x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving QDEL ample headroom to grow its debt facilities.
Next Steps:
QDEL’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. 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 QDEL has been performing in the past. I recommend you continue to research Quidel to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for QDEL’s future growth? Take a look at our free research report of analyst consensus for QDEL’s outlook.
Valuation: What is QDEL 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 QDEL 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
