Edwards Lifesciences Corporation (NYSE:EW), a large-cap worth US$37b, comes to mind for investors seeking a strong and reliable stock investment. Most investors favour these big stocks due to their strong balance sheet and high market liquidity, meaning there are an abundance of stock in the public market available for trading. 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. Using the most recent data for EW, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
EW’s Debt (And Cash Flows)
Over the past year, EW has reduced its debt from US$1.0b to US$594m , which includes long-term debt. With this debt repayment, EW's cash and short-term investments stands at US$957m to keep the business going. Moreover, EW has generated US$927m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 156%, indicating that EW’s current level of operating cash is high enough to cover debt.
Can EW meet its short-term obligations with the cash in hand?
Looking at EW’s US$877m in current liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$2.3b, leading to a 2.61x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. Generally, for Medical Equipment companies, this is a reasonable ratio as there's enough of a cash buffer without holding too much capital in low return investments.
Is EW’s debt level acceptable?
EW’s level of debt is appropriate relative to its total equity, at 19%. EW is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
EW has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for EW's financial health. Other important fundamentals need to be considered alongside. You should continue to research Edwards Lifesciences to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EW’s future growth? Take a look at our free research report of analyst consensus for EW’s outlook.
- Valuation: What is EW 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 EW 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 firstname.lastname@example.org. 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.