Yahoo Finance Vonage Holdings Corp. (NYSE:VG): Financial Strength Analysis
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Vonage Holdings Corp. (NYSE:VG), with a market capitalization of US$2.3b, rarely draw their attention from the investing community. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. This article will examine VG’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. Don’t forget that this is a general and concentrated examination of Vonage Holdings’s financial health, so you should conduct further analysis into VG here.
Check out our latest analysis for Vonage Holdings
How does VG’s operating cash flow stack up against its debt?
VG has shrunken its total debt levels in the last twelve months, from US$278m to US$211m , which includes long-term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$26m for investing into the business. On top of this, VG has generated US$142m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 67%, signalling that VG’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In VG’s case, it is able to generate 0.67x cash from its debt capital.
Does VG’s liquid assets cover its short-term commitments?
With current liabilities at US$163m, the company may not be able to easily meet these obligations given the level of current assets of US$122m, with a current ratio of 0.75x.
Can VG service its debt comfortably?
VG’s level of debt is appropriate relative to its total equity, at 39%. VG is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with VG, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
VG has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Though its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. This is only a rough assessment of financial health, and I’m sure VG has company-specific issues impacting its capital structure decisions. You should continue to research Vonage Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VG’s future growth? Take a look at our free research report of analyst consensus for VG’s outlook.
Valuation: What is VG 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 VG 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.
