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Does Canada Goose Holdings Inc’s (TSE:GOOS) Debt Level Pose A Problem?

Mid-caps stocks, like Canada Goose Holdings Inc (TSX:GOOS) with a market capitalization of CA$6.05B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. GOOS’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into GOOS here. Check out our latest analysis for Canada Goose Holdings

Does GOOS generate enough cash through operations?

GOOS has sustained its debt level by about CA$146.09M over the last 12 months – this includes both the current and long-term debt. At this constant level of debt, the current cash and short-term investment levels stands at CA$9.68M for investing into the business. Additionally, GOOS has produced CA$39.33M in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 26.92%, indicating that GOOS’s debt is appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In GOOS’s case, it is able to generate 0.27x cash from its debt capital.

Can GOOS pay its short-term liabilities?

With current liabilities at CA$64.27M, it seems that the business has been able to meet these obligations given the level of current assets of CA$163.22M, with a current ratio of 2.54x. Generally, for Luxury companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

TSX:GOOS Historical Debt Jun 11th 18
TSX:GOOS Historical Debt Jun 11th 18

Is GOOS’s debt level acceptable?

GOOS is a relatively highly levered company with a debt-to-equity of 56.26%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. We can check to see whether GOOS is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In GOOS’s, case, the ratio of 9.01x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

GOOS’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. This is only a rough assessment of financial health, and I’m sure GOOS has company-specific issues impacting its capital structure decisions. You should continue to research Canada Goose Holdings to get a better picture of the mid-cap by looking at:

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  1. Future Outlook: What are well-informed industry analysts predicting for GOOS’s future growth? Take a look at our free research report of analyst consensus for GOOS’s outlook.

  2. Valuation: What is GOOS 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 GOOS is currently mispriced by the market.

  3. 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 pass 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.