Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Altaba Inc (NASDAQ:AABA) a safer option. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. However, the key to their continued success lies in its financial health. Today we will look at Altaba’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into AABA here. Check out our latest analysis for Altaba
Does AABA produce enough cash relative to debt?
AABA’s debt levels surged from $1,233.5M to $1,299.9M over the last 12 months , which is made up of current and long term debt. With this growth in debt, AABA currently has $6,820.4M remaining in cash and short-term investments , ready to deploy into the business. Moreover, AABA has produced $1,248.9M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 96.07%, indicating that AABA’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In AABA’s case, it is able to generate 0.96x cash from its debt capital.
Can AABA pay its short-term liabilities?
At the current liabilities level of $1,287.4M liabilities, it appears that the company has been able to meet these obligations given the level of current assets of $8,126.2M, with a current ratio of 6.31x. However, anything above 3x is considered high and could mean that AABA has too much idle capital in low-earning investments.
Does AABA face the risk of succumbing to its debt-load?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. Generally, large-cap stocks are considered financially healthy if its ratio is below 40%. AABA’s level of debt is low relative to its total equity, at 2.76%. AABA is not taking on too much debt commitment, which may be constraining for future growth.
AABA has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how AABA has been performing in the past. You should continue to research Altaba to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AABA’s future growth? Take a look at our free research report of analyst consensus for AABA’s outlook.
2. Valuation: What is AABA 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 AABA is currently mispriced by the market.
3. 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.