Investors seeking to preserve capital in a volatile environment might consider large-cap stocks such as Symantec Corporation (NASDAQ:SYMC) a safer option. Doing business globally, large caps tend to have diversified revenue streams and attractive capital returns, making them desirable investments for risk-averse portfolios. But, the key to extending previous success is in the health of the company’s financials. This article will examine Symantec’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 information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into SYMC here. Check out our latest analysis for Symantec
How much cash does SYMC generate through its operations?
SYMC’s debt levels have fallen from US$8.19B to US$5.03B over the last 12 months – this includes both the current and long-term debt. With this debt repayment, SYMC’s cash and short-term investments stands at US$2.16B for investing into the business. On top of this, SYMC has generated cash from operations of US$950.00M over the same time period, resulting in an operating cash to total debt ratio of 18.90%, signalling that SYMC’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In SYMC’s case, it is able to generate 0.19x cash from its debt capital.
Does SYMC’s liquid assets cover its short-term commitments?
At the current liabilities level of US$3.15B liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$3.49B, with a current ratio of 1.11x. Generally, for Software companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Does SYMC face the risk of succumbing to its debt-load?
SYMC is a relatively highly levered company with a debt-to-equity of 99.41%. This is not unusual for large-caps since debt tends to be less expensive than equity because interest payments are tax deductible. Accordingly, large companies often have an advantage over small-caps through lower cost of capital due to cheaper financing. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. Preferably, earnings before interest and tax (EBIT) should be at least three times as large as net interest. In SYMC’s case, the ratio of 1.82x suggests that interest is not strongly covered. The sheer size of Symantec means it is unlikely to default or announce bankruptcy anytime soon. However, lenders may be more reluctant to lend out more funding as SYMC’s low interest coverage already puts the company in a risky position.
At its current level of cash flow coverage, SYMC has room for improvement to better cushion for events which may require debt repayment. Though, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. I admit this is a fairly basic analysis for SYMC’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Symantec to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SYMC’s future growth? Take a look at our free research report of analyst consensus for SYMC’s outlook.
- Valuation: What is SYMC 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 SYMC 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.