Yahoo Finance Are MD.C. Holdings Inc.’s (NYSE:MDC) Interest Costs Too High?
While small-cap stocks, such as MD.C. Holdings Inc. (NYSE:MDC) with its market cap of US$1.79B, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Consumer Durables businesses operating in the environment facing headwinds from current disruption, even ones that are profitable, are inclined towards being higher risk. So, understanding the company’s financial health becomes essential. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I’d encourage you to dig deeper yourself into MDC here.
Does MDC generate enough cash through operations?
Over the past year, MDC has ramped up its debt from US$971.13M to US$1.11B , which is made up of current and long term debt. With this increase in debt, the current cash and short-term investment levels stands at US$522.59M for investing into the business. Additionally, MDC has generated cash from operations of US$65.47M over the same time period, resulting in an operating cash to total debt ratio of 5.88%, signalling that MDC’s current level of operating cash is not high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In MDC’s case, it is able to generate 0.059x cash from its debt capital.
Does MDC’s liquid assets cover its short-term commitments?
With current liabilities at US$371.41M, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 7.15x. Though, a ratio greater than 3x may be considered as too high, as MDC could be holding too much capital in a low-return investment environment.
Can MDC service its debt comfortably?
With a debt-to-equity ratio of 76.24%, MDC can be considered as an above-average leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
MDC’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure MDC has company-specific issues impacting its capital structure decisions. I suggest you continue to research M.D.C. Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MDC’s future growth? Take a look at our free research report of analyst consensus for MDC’s outlook.
Valuation: What is MDC 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 MDC 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.
