Yahoo Finance Is Veeco Instruments Inc’s (NASDAQ:VECO) Balance Sheet Strong Enough To Weather A Storm?
While small-cap stocks, such as Veeco Instruments Inc (NASDAQ:VECO) with its market cap of US$519.6m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Semiconductor companies, especially ones that are currently loss-making, are inclined towards being higher risk. Evaluating financial health as part of your investment thesis is crucial. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, I know these factors are very high-level, so I recommend you dig deeper yourself into VECO here.
How does VECO’s operating cash flow stack up against its debt?
Over the past year, VECO has maintained its debt levels at around US$281.4m comprising of short- and long-term debt. At this constant level of debt, VECO currently has US$261.5m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can examine some of VECO’s operating efficiency ratios such as ROA here.
Can VECO pay its short-term liabilities?
Looking at VECO’s most recent US$195.6m 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 2.94x. Usually, for Semiconductor companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is VECO’s debt level acceptable?
With debt reaching 47.4% of equity, VECO may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. However, since VECO is presently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
At its current level of cash flow coverage, VECO has room for improvement to better cushion for events which may require debt repayment. However, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for VECO’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Veeco Instruments to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VECO’s future growth? Take a look at our free research report of analyst consensus for VECO’s outlook.
Valuation: What is VECO 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 VECO 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.
