Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Thor Industries Inc (NYSE:THO), with a market capitalization of US$6.07B, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. THO’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into THO here. See our latest analysis for Thor Industries
Does THO generate an acceptable amount of cash through operations?
THO has shrunken its total debt levels in the last twelve months, from US$360.00M to US$145.00M , which comprises of short- and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$223.26M for investing into the business. Moreover, THO has generated US$419.33M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 289.20%, meaning that THO’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 THO’s case, it is able to generate 2.89x cash from its debt capital.
Does THO’s liquid assets cover its short-term commitments?
With current liabilities at US$781.05M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.51x. For Auto 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 THO’s debt level acceptable?
With a debt-to-equity ratio of 4.58%, THO’s debt level is relatively low. THO is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether THO 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 THO’s, case, the ratio of 110x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
THO has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure THO has company-specific issues impacting its capital structure decisions. I suggest you continue to research Thor Industries to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for THO’s future growth? Take a look at our free research report of analyst consensus for THO’s outlook.
- Valuation: What is THO 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 THO 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.