Yahoo Finance Is Floor & Decor Holdings Inc (NYSE:FND) As Strong As Its Balance Sheet Indicates?
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Floor & Decor Holdings Inc (NYSE:FND), with a market capitalization of US$4.62B, rarely draw their attention from the investing community. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at FND’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into FND here. Check out our latest analysis for Floor & Decor Holdings
Does FND generate an acceptable amount of cash through operations?
Over the past year, FND has reduced its debt from US$390.74M to US$189.06M , which comprises of short- and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at US$556.00K for investing into the business. Moreover, FND has generated cash from operations of US$109.21M over the same time period, leading to an operating cash to total debt ratio of 57.76%, meaning that FND’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 FND’s case, it is able to generate 0.58x cash from its debt capital.
Can FND meet its short-term obligations with the cash in hand?
At the current liabilities level of US$359.30M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.4x. For Specialty Retail companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is FND’s debt level acceptable?
With a debt-to-equity ratio of 35.54%, FND’s debt level may be seen as prudent. This range is considered safe as FND is not taking on too much debt obligation, which may be constraining for future growth. We can test if FND’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For FND, the ratio of 12.97x 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:
FND has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure FND has company-specific issues impacting its capital structure decisions. I recommend you continue to research Floor & Decor Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for FND’s future growth? Take a look at our free research report of analyst consensus for FND’s outlook.
Valuation: What is FND 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 FND 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.
