What Investors Should Know About 3D Systems Corporation's (NYSE:DDD) Financial Strength

While small-cap stocks, such as 3D Systems Corporation (NYSE:DDD) with its market cap of US$1.10B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Companies operating in the Tech industry, in particular ones that run negative earnings, are inclined towards being higher risk. Assessing first and foremost the financial health is crucial. Here are few basic financial health checks you should consider before taking the plunge. However, since I only look at basic financial figures, I recommend you dig deeper yourself into DDD here.

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

DDD has shrunken its total debt levels in the last twelve months, from US$8.72M to US$8.16M made up of predominantly near term debt. With this debt payback, the current cash and short-term investment levels stands at US$184.95M for investing into the business. On top of this, DDD has produced US$56.90M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 697.41%, indicating that DDD’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for loss making companies as traditional metrics such as return on asset (ROA) requires positive earnings. In DDD’s case, it is able to generate 6.97x cash from its debt capital.

Can DDD pay its short-term liabilities?

Looking at DDD’s most recent US$130.41M liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$432.95M, leading to a 3.32x current account ratio. However, a ratio greater than 3x may be considered as too high, as DDD could be holding too much capital in a low-return investment environment.

Is DDD’s debt level acceptable?

DDD’s level of debt is low relative to its total equity, at 1.26%. This range is considered safe as DDD is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors' risk associated with debt is virtually non-existent with DDD, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

DDD’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for DDD's financial health. Other important fundamentals need to be considered alongside. You should continue to research 3D Systems to get a more holistic view of the stock by looking at:

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.