Yahoo Finance Maxim Integrated Products, Inc. (NASDAQ:MXIM): Time For A Financial Health Check
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The size of Maxim Integrated Products, Inc. (NASDAQ:MXIM), a US$14b large-cap, often attracts investors seeking a reliable investment in the stock market. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. But, the health of the financials determines whether the company continues to succeed. This article will examine Maxim Integrated Products’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. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into MXIM here.
View our latest analysis for Maxim Integrated Products
MXIM’s Debt (And Cash Flows)
Over the past year, MXIM has reduced its debt from US$1.5b to US$992m , which includes long-term debt. With this reduction in debt, MXIM currently has US$1.9b remaining in cash and short-term investments , ready to be used for running the business. Moreover, MXIM has generated cash from operations of US$785m over the same time period, resulting in an operating cash to total debt ratio of 79%, indicating that MXIM’s operating cash is sufficient to cover its debt.
Can MXIM meet its short-term obligations with the cash in hand?
With current liabilities at US$399m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 6.46x. The current ratio is calculated by dividing current assets by current liabilities. However, a ratio greater than 3x may be considered by some to be quite high, however this is not necessarily a negative for the company.
Does MXIM face the risk of succumbing to its debt-load?
With debt reaching 60% of equity, MXIM may be thought of as relatively highly levered. This isn’t uncommon for large companies because interest payments on debt are tax deductible, meaning debt can be a cheaper source of capital than equity. Consequently, larger-cap organisations tend to enjoy lower cost of capital as a result of easily attained financing, providing an advantage over smaller companies.
Next Steps:
MXIM’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 MXIM has company-specific issues impacting its capital structure decisions. I recommend you continue to research Maxim Integrated Products to get a more holistic view of the large-cap by looking at:
Future Outlook: What are well-informed industry analysts predicting for MXIM’s future growth? Take a look at our free research report of analyst consensus for MXIM’s outlook.
Valuation: What is MXIM 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 MXIM 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 editorial-team@simplywallst.com. 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.
