Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Carlisle Companies Incorporated (NYSE:CSL), with a market cap of US$6.69B, are often out of the spotlight. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Let’s take a look at CSL’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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into CSL here. See our latest analysis for Carlisle Companies
How does CSL’s operating cash flow stack up against its debt?
CSL has built up its total debt levels in the last twelve months, from US$596.40M to US$781.90M , which comprises of short- and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$147.60M for investing into the business. Moreover, CSL has produced cash from operations of US$458.70M in the last twelve months, resulting in an operating cash to total debt ratio of 58.66%, meaning that CSL’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 CSL’s case, it is able to generate 0.59x cash from its debt capital.
Can CSL meet its short-term obligations with the cash in hand?
With current liabilities at US$0, it seems that the business has not been able to meet these commitments with a current assets level of US$0, leading to a x current account ratio. which is under the appropriate industry ratio of 3x.
Is CSL’s debt level acceptable?
With debt at 32.09% of equity, CSL may be thought of as appropriately levered. This range is considered safe as CSL is not taking on too much debt obligation, which may be constraining for future growth. We can check to see whether CSL 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 CSL’s, case, the ratio of 15.1x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving CSL ample headroom to grow its debt facilities.
CSL’s debt level is appropriate for a company its size. Furthermore, it is able to generate sufficient cash flow coverage, meaning it is able to put its debt in good use. Though its lack of liquidity raises questions over current asset management practices for the mid-cap. I admit this is a fairly basic analysis for CSL’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Carlisle Companies to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for CSL’s future growth? Take a look at our free research report of analyst consensus for CSL’s outlook.
- 2. Valuation: What is CSL 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 CSL is currently mispriced by the market.
- 3. 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.