Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Chegg Inc (NYSE:CHGG), with a market cap of US$2.35B, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at CHGG’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into CHGG here. View our latest analysis for Chegg
Is CHGG’s debt level acceptable?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For Chegg, investors should not worry about its debt levels because the company has none! This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with CHGG, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can CHGG meet its short-term obligations with the cash in hand?
Since Chegg doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. Looking at CHGG’s most recent US$51.56M liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$228.94M, leading to a 4.44x current account ratio. Though, anything above 3x is considered high and could mean that CHGG has too much idle capital in low-earning investments.
CHGG has zero-debt as well as ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, though, some level of debt may also boost earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure CHGG has company-specific issues impacting its capital structure decisions. You should continue to research Chegg to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CHGG’s future growth? Take a look at our free research report of analyst consensus for CHGG’s outlook.
- Valuation: What is CHGG 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 CHGG 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.