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With a market capitalization of US$9.7b, Tableau Software, Inc. (NYSE:DATA) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high liquidity, which means there's plenty of stocks available to the public for trading. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Today I will analyse the latest financial data for DATA to determine is solvency and liquidity and whether the stock is a sound investment.
DATA’s Debt (And Cash Flows)
DATA has increased its debt level by about US$269m over the last 12 months accounting for long term debt. With this increase in debt, the current cash and short-term investment levels stands at US$1.1b , ready to be used for running the business. On top of this, DATA has produced US$126m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 47%, meaning that DATA’s current level of operating cash is high enough to cover debt.
Can DATA meet its short-term obligations with the cash in hand?
With current liabilities at US$538m, the company has been able to meet these obligations given the level of current assets of US$1.4b, with a current ratio of 2.62x. The current ratio is the number you get when you divide current assets by current liabilities. For Software 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 DATA’s debt level acceptable?
DATA’s level of debt is appropriate relative to its total equity, at 26%. This range is considered safe as DATA is not taking on too much debt obligation, which may be constraining for future growth. DATA's risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
DATA has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for DATA's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Tableau Software to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DATA’s future growth? Take a look at our free research report of analyst consensus for DATA’s outlook.
- Valuation: What is DATA 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 DATA 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.