With a market capitalization of €34b, Dassault Systèmes SE (EPA:DSY) 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. Assessing the most recent data for DSY, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity.
Does DSY Produce Much Cash Relative To Its Debt?
DSY’s debt level has been constant at around €1.0b over the previous year which accounts for long term debt. At this stable level of debt, DSY currently has €2.8b remaining in cash and short-term investments to keep the business going. On top of this, DSY has generated cash from operations of €899m during the same period of time, resulting in an operating cash to total debt ratio of 90%, meaning that DSY’s current level of operating cash is high enough to cover debt.
Does DSY’s liquid assets cover its short-term commitments?
With current liabilities at €2.0b, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.08x. The current ratio is calculated by dividing current assets by current liabilities. Generally, for Software companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Can DSY service its debt comfortably?
DSY’s level of debt is appropriate relative to its total equity, at 22%. DSY is not taking on too much debt commitment, which may be constraining for future growth.
DSY’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 exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure DSY has company-specific issues impacting its capital structure decisions. I suggest you continue to research Dassault Systèmes to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DSY’s future growth? Take a look at our free research report of analyst consensus for DSY’s outlook.
- Valuation: What is DSY 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 DSY 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.