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Does Canada Goose Holdings Inc’s (TSE:GOOS) Debt Level Pose A Problem?

Stocks with market capitalization between $2B and $10B, such as Canada Goose Holdings Inc (TSE:GOOS) with a size of CA$9.77b, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine GOOS’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 top-level understanding, so I encourage you to look further into GOOS here. View out our latest analysis for Canada Goose Holdings

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

GOOS has shrunken its total debt levels in the last twelve months, from CA$146.09m to CA$137.07m , which is made up of current and long term debt. With this reduction in debt, GOOS’s cash and short-term investments stands at CA$95.29m for investing into the business. On top of this, GOOS has generated CA$126.23m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 92.09%, signalling that GOOS’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In GOOS’s case, it is able to generate 0.92x cash from its debt capital.

Can GOOS meet its short-term obligations with the cash in hand?

Looking at GOOS’s most recent CA$133.60m liabilities, the company has been able to meet these commitments with a current assets level of CA$300.97m, leading to a 2.25x current account ratio. Usually, for Luxury companies, this is a suitable ratio as there’s enough of a cash buffer without holding too capital in low return investments.

TSX:GOOS Historical Debt June 22nd 18
TSX:GOOS Historical Debt June 22nd 18

Can GOOS service its debt comfortably?

With a debt-to-equity ratio of 56.27%, GOOS can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether GOOS is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In GOOS’s, case, the ratio of 11.03x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

GOOS’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 GOOS’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 GOOS has been performing in the past. I recommend you continue to research Canada Goose Holdings to get a better picture of the mid-cap by looking at:

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

  2. Valuation: What is GOOS 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 GOOS 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.


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.