Mid-caps stocks, like 8×8 Inc (NYSE:EGHT) with a market capitalization of US$2.05B, 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. EGHT’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into EGHT here. See our latest analysis for 8×8
Is EGHT’s debt level acceptable?
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%. The good news for investors is that 8×8 has no debt. 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 EGHT, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can EGHT meet its short-term obligations with the cash in hand?
Given zero long-term debt on its balance sheet, 8×8 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. At the current liabilities level of US$43.34M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$197.35M, with a current ratio of 4.55x. However, anything above 3x is considered high and could mean that EGHT has too much idle capital in low-earning investments.
EGHT has no debt as well as ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and its investors, though, some degree of debt could also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for EGHT’s financial health. Other important fundamentals need to be considered alongside. You should continue to research 8×8 to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EGHT’s future growth? Take a look at our free research report of analyst consensus for EGHT’s outlook.
- Valuation: What is EGHT 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 EGHT 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.