All You Need To Know About Altair Engineering Inc.'s (NASDAQ:ALTR) Financial Health

Stocks with market capitalization between $2B and $10B, such as Altair Engineering Inc. (NASDAQ:ALTR) with a size of US$2.7b, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. This article will examine ALTR’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into ALTR here.

Check out our latest analysis for Altair Engineering

ALTR’s Debt (And Cash Flows)

ALTR has built up its total debt levels in the last twelve months, from US$410k to US$32m , which includes long-term debt. With this increase in debt, ALTR's cash and short-term investments stands at US$35m , ready to be used for running the business. Moreover, ALTR has generated cash from operations of US$36m during the same period of time, resulting in an operating cash to total debt ratio of 114%, meaning that ALTR’s operating cash is sufficient to cover its debt.

Can ALTR meet its short-term obligations with the cash in hand?

At the current liabilities level of US$128m, it seems that the business has been able to meet these obligations given the level of current assets of US$154m, with a current ratio of 1.21x. The current ratio is calculated by dividing current assets by current liabilities. For Software 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 ALTR face the risk of succumbing to its debt-load?

With a debt-to-equity ratio of 11%, ALTR's debt level may be seen as prudent. ALTR is not taking on too much debt commitment, which may be constraining for future growth.

Next Steps:

ALTR has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I'm sure ALTR has company-specific issues impacting its capital structure decisions. You should continue to research Altair Engineering to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for ALTR’s future growth? Take a look at our free research report of analyst consensus for ALTR’s outlook.
2. Valuation: What is ALTR 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 ALTR 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.

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 editorial-team@simplywallst.com. 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.