Mid-caps stocks, like CyberArk Software Ltd. (NASDAQ:CYBR) with a market capitalization of US$2.8b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Today we will look at CYBR’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into CYBR here.
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Does CYBR face the risk of succumbing to its debt-load?
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. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. For CyberArk Software, investors should not worry about its debt levels because the company has none! It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with CYBR, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does CYBR’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, CyberArk Software has no solvency issues, which is 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 CYBR’s US$121m in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.52x. Having said that, a ratio greater than 3x may be considered by some to be quite high, however this is not necessarily a negative for the company.
CYBR has no debt in addition to ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, but some degree of debt may also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for CYBR’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research CyberArk Software to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CYBR’s future growth? Take a look at our free research report of analyst consensus for CYBR’s outlook.
- Valuation: What is CYBR 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 CYBR 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.