Yahoo Finance What You Must Know About First Solar Inc’s (NASDAQ:FSLR) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as First Solar Inc (NASDAQ:FSLR), with a market cap of US$5.12b, often get neglected by retail investors. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. This article will examine FSLR’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into FSLR here.
Check out our latest analysis for First Solar
Does FSLR produce enough cash relative to debt?
FSLR’s debt levels surged from US$432.6m to US$464.4m over the last 12 months – this includes both the current and long-term debt. With this increase in debt, FSLR’s cash and short-term investments stands at US$3.13b for investing into the business. Moreover, FSLR has generated cash from operations of US$1.10b during the same period of time, resulting in an operating cash to total debt ratio of 237%, meaning that FSLR’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires a positive net income. In FSLR’s case, it is able to generate 2.37x cash from its debt capital.
Can FSLR meet its short-term obligations with the cash in hand?
With current liabilities at US$815.4m, it seems that the business has been able to meet these obligations given the level of current assets of US$3.99b, with a current ratio of 4.89x. Though, anything above 3x is considered high and could mean that FSLR has too much idle capital in low-earning investments.
Can FSLR service its debt comfortably?
FSLR’s level of debt is low relative to its total equity, at 9.1%. This range is considered safe as FSLR is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is extremely low for FSLR, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
FSLR’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 FSLR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research First Solar to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for FSLR’s future growth? Take a look at our free research report of analyst consensus for FSLR’s outlook.
Valuation: What is FSLR 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 FSLR 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
