Yahoo Finance Box Inc (NYSE:BOX): Time For A Financial Health Check
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Box Inc (NYSE:BOX), with a market capitalization of US$3.74B, rarely draw their attention from the investing community. 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. Let’s take a look at BOX’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into BOX here. Check out our latest analysis for Box
Does BOX generate enough cash through operations?
Over the past year, BOX has ramped up its debt from US$75.45M to US$85.82M , which is made up of current and long term debt. With this growth in debt, BOX’s cash and short-term investments stands at US$208.08M , ready to deploy into the business. Moreover, BOX has produced cash from operations of US$61.82M over the same time period, resulting in an operating cash to total debt ratio of 72.03%, signalling that BOX’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for unprofitable companies as traditional metrics such as return on asset (ROA) requires positive earnings. In BOX’s case, it is able to generate 0.72x cash from its debt capital.
Can BOX pay its short-term liabilities?
With current liabilities at US$393.97M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.01x. For Internet companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Is BOX’s debt level acceptable?
Since total debt levels have outpaced equities, BOX is a highly leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since BOX is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
BOX’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Since there is also no concerns around BOX’s liquidity needs, this may be its optimal capital structure for the time being. Keep in mind I haven’t considered other factors such as how BOX has been performing in the past. You should continue to research Box to get a better picture of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for BOX’s future growth? Take a look at our free research report of analyst consensus for BOX’s outlook.
Valuation: What is BOX 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 BOX 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 pass 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.
