Has Tenable Holdings Inc (NASDAQ:TENB) Got Enough Cash?

Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Tenable Holdings Inc (NASDAQ:TENB), with a market cap of US$2.7b, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine TENB’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. Don’t forget that this is a general and concentrated examination of Tenable Holdings’s financial health, so you should conduct further analysis into TENB here.

Check out our latest analysis for Tenable Holdings

How does TENB’s operating cash flow stack up against its debt?

Over the past year, TENB has ramped up its debt from US$2m to US$23m – this includes both the current and long-term debt. With this increase in debt, TENB’s cash and short-term investments stands at US$287m for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can take a look at some of TENB’s operating efficiency ratios such as ROA here.

Can TENB pay its short-term liabilities?

With current liabilities at US$220m, the company has been able to meet these obligations given the level of current assets of US$381m, with a current ratio of 1.73x. Usually, for Software companies, this is a suitable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.

NasdaqGS:TENB Historical Debt November 8th 18
NasdaqGS:TENB Historical Debt November 8th 18

Does TENB face the risk of succumbing to its debt-load?

With a debt-to-equity ratio of 17%, TENB’s debt level may be seen as prudent. TENB is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for TENB, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

TENB’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, 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 TENB’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Tenable Holdings to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for TENB’s future growth? Take a look at our free research report of analyst consensus for TENB’s outlook.
  2. Historical Performance: What has TENB’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  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.

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 editorial-team@simplywallst.com.