Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Tootsie Roll Industries, Inc. (NYSE:TR) with a market-capitalization of US$2.3b, rarely draw their attention. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at TR’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into TR here.
TR’s Debt (And Cash Flows)
TR has sustained its debt level by about US$7.9m over the last 12 months including long-term debt. At this constant level of debt, TR’s cash and short-term investments stands at US$186m to keep the business going. On top of this, TR has generated cash from operations of US$101m during the same period of time, resulting in an operating cash to total debt ratio of 1282%, indicating that TR’s operating cash is sufficient to cover its debt.
Can TR pay its short-term liabilities?
Looking at TR’s US$61m in current liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$304m, with a current ratio of 4.95x. The current ratio is calculated by dividing current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.
Does TR face the risk of succumbing to its debt-load?
TR’s level of debt is low relative to its total equity, at 1.0%. This range is considered safe as TR is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
TR 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 exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for TR’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Tootsie Roll Industries to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TR’s future growth? Take a look at our free research report of analyst consensus for TR’s outlook.
- Valuation: What is TR 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 TR 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.
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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.