Investors pursuing a solid, dependable stock investment can often be led to Twitter Inc (LSE:0QZB), a large-cap worth US$23.31B. One reason being its ‘too big to fail’ aura which gives it the appearance of a strong and stable investment. But, the key to extending previous success is in the health of the company’s financials. I will provide an overview of Twitter’s financial liquidity and leverage to give you an idea of Twitter’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into 0QZB here. Check out our latest analysis for Twitter
How does 0QZB’s operating cash flow stack up against its debt?
Over the past year, 0QZB has ramped up its debt from US$1.69B to US$1.79B – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$4.40B , ready to deploy into the business. Moreover, 0QZB has produced US$831.21M in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 46.34%, meaning that 0QZB’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses since metrics such as return on asset (ROA) requires positive earnings. In 0QZB’s case, it is able to generate 0.46x cash from its debt capital.
Can 0QZB pay its short-term liabilities?
With current liabilities at US$583.28M, the company has been able to meet these obligations given the level of current assets of US$5.32B, with a current ratio of 9.12x. Though, anything about 3x may be excessive, since 0QZB may be leaving too much capital in low-earning investments.
Is 0QZB’s debt level acceptable?
0QZB’s level of debt is appropriate relative to its total equity, at 35.54%. This range is considered safe as 0QZB is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for 0QZB, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
0QZB has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. 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 0QZB has been performing in the past. You should continue to research Twitter to get a more holistic view of the stock by looking at: