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Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Jones Lang LaSalle Incorporated (NYSE:JLL), with a market cap of US$7.0b, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine JLL’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into JLL here.
JLL’s Debt (And Cash Flows)
JLL has shrunk its total debt levels in the last twelve months, from US$1.1b to US$1.0b – this includes long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$481m to keep the business going. Additionally, JLL has produced US$604m in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 60%, indicating that JLL’s operating cash is sufficient to cover its debt.
Can JLL pay its short-term liabilities?
With current liabilities at US$4.8b, it appears that the company has been able to meet these obligations given the level of current assets of US$5.2b, with a current ratio of 1.09x. The current ratio is calculated by dividing current assets by current liabilities. For Real Estate companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too much capital in low return investments.
Does JLL face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 27%, JLL’s debt level may be seen as prudent. This range is considered safe as JLL is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether JLL 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 JLL’s, case, the ratio of 14.59x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as JLL’s high interest coverage is seen as responsible and safe practice.
JLL 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 an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for JLL’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Jones Lang LaSalle to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for JLL’s future growth? Take a look at our free research report of analyst consensus for JLL’s outlook.
- Valuation: What is JLL 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 JLL 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.