Yahoo Finance Is SVMK Inc.'s (NASDAQ:SVMK) Balance Sheet Strong Enough To Weather A Storm?
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like SVMK Inc. (NASDAQ:SVMK), with a market cap of US$2.1b, are often out of the spotlight. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. SVMK’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into SVMK here.
Check out our latest analysis for SVMK
Does SVMK Produce Much Cash Relative To Its Debt?
SVMK's debt levels have fallen from US$411m to US$306m over the last 12 months , which also accounts for long term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$166m to keep the business going. On top of this, SVMK has generated US$47m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 16%, meaning that SVMK’s current level of operating cash is not high enough to cover debt.
Can SVMK pay its short-term liabilities?
With current liabilities at US$145m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.31x. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Software companies, this is a suitable ratio since there's a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is SVMK’s debt level acceptable?
With debt reaching 92% of equity, SVMK may be thought of as relatively highly levered. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since SVMK is currently unprofitable, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
Next Steps:
SVMK’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. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Keep in mind I haven't considered other factors such as how SVMK has been performing in the past. I recommend you continue to research SVMK to get a more holistic view of the mid-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for SVMK’s future growth? Take a look at our free research report of analyst consensus for SVMK’s outlook.
Valuation: What is SVMK 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 SVMK 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
