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With a market capitalization of US$55b, Intuitive Surgical, Inc. (NASDAQ:ISRG) 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. Using the most recent data for ISRG, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
Does ISRG Produce Much Cash Relative To Its Debt?
Over the past year, ISRG has borrowed debt capital of around US$77m accounting for long term debt. With this ramp up in debt, ISRG’s cash and short-term investments stands at US$2.8b , ready to be used for running the business. Moreover, ISRG has produced cash from operations of US$1.2b during the same period of time, leading to an operating cash to total debt ratio of 1596%, signalling that ISRG’s operating cash is sufficient to cover its debt.
Can ISRG pay its short-term liabilities?
With current liabilities at US$740m, it appears that the company has been able to meet these obligations given the level of current assets of US$4.0b, with a current ratio of 5.44x. The current ratio is calculated by dividing current assets by current liabilities. However, many consider a ratio above 3x to be high, although this is not necessarily a bad thing.
Can ISRG service its debt comfortably?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. A ratio below 40% for large-cap stocks is considered as financially healthy, as a rule of thumb. With a debt-to-equity ratio of 1.1%, ISRG’s debt level is relatively low. This range is considered safe as ISRG is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
ISRG’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how ISRG has been performing in the past. You should continue to research Intuitive Surgical to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ISRG’s future growth? Take a look at our free research report of analyst consensus for ISRG’s outlook.
- Valuation: What is ISRG 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 ISRG 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.