Yahoo Finance Has Ralph Lauren Corporation (NYSE:RL) Got Enough Cash?
Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Ralph Lauren Corporation (NYSE:RL). With a market valuation of US$10.9b, RL is a safe haven in times of market uncertainty due to its strong balance sheet. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Today I will analyse the latest financial data for RL to determine is solvency and liquidity and whether the stock is a sound investment.
View our latest analysis for Ralph Lauren
How does RL’s operating cash flow stack up against its debt?
Over the past year, RL has reduced its debt from US$898m to US$848m – this includes both the current and long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$2.0b , ready to deploy into the business. On top of this, RL has produced cash from operations of US$872m during the same period of time, leading to an operating cash to total debt ratio of 103%, indicating that RL’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In RL’s case, it is able to generate 1.03x cash from its debt capital.
Can RL meet its short-term obligations with the cash in hand?
At the current liabilities level of US$1.6b liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.27x. For Luxury 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.
Can RL service its debt comfortably?
With a debt-to-equity ratio of 25%, RL’s debt level may be seen as prudent. This range is considered safe as RL is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
RL’s debt level is appropriate for a company its size, and it is also able to generate sufficient cash flow coverage, meaning it has been able to put its debt in good use. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how RL has been performing in the past. I suggest you continue to research Ralph Lauren to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RL’s future growth? Take a look at our free research report of analyst consensus for RL’s outlook.
Valuation: What is RL 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 RL 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.