Yahoo Finance All You Need To Know About Penumbra Inc’s (NYSE:PEN) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Penumbra Inc (NYSE:PEN), with a market cap of US$5.08b, often get neglected by retail investors. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Let’s take a look at PEN’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into PEN here. Check out our latest analysis for Penumbra
Can PEN service its debt comfortably?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For Penumbra, investors should not worry about its debt levels because the company has none! This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with PEN, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can PEN meet its short-term obligations with the cash in hand?
Since Penumbra doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of US$51.58m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 7.41x. However, anything about 3x may be excessive, since PEN may be leaving too much capital in low-earning investments.
Next Steps:
PEN has no debt as well as ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, but some degree of debt may also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure PEN has company-specific issues impacting its capital structure decisions. I recommend you continue to research Penumbra to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PEN’s future growth? Take a look at our free research report of analyst consensus for PEN’s outlook.
Valuation: What is PEN 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 PEN 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 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.
