Yahoo Finance All You Need To Know About Ciena Corporation’s (NYSE:CIEN) Financial Health
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Ciena Corporation (NYSE:CIEN), with a market capitalization of US$6.8b, rarely draw their attention from the investing community. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at CIEN’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into CIEN here.
View our latest analysis for Ciena
Does CIEN produce enough cash relative to debt?
CIEN’s debt levels have fallen from US$1.0b to US$765m over the last 12 months , which includes long-term debt. With this debt payback, CIEN currently has US$894m remaining in cash and short-term investments , ready to deploy into the business. On top of this, CIEN has produced cash from operations of US$229m over the same time period, leading to an operating cash to total debt ratio of 30%, indicating that CIEN’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency for unprofitable companies since metrics such as return on asset (ROA) requires a positive net income. In CIEN’s case, it is able to generate 0.3x cash from its debt capital.
Does CIEN’s liquid assets cover its short-term commitments?
Looking at CIEN’s US$963m in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.22x. For Communications companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too much capital in low return investments.
Can CIEN service its debt comfortably?
With a debt-to-equity ratio of 40%, CIEN’s debt level may be seen as prudent. This range is considered safe as CIEN is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is very low for CIEN, and the company also has the ability and headroom to increase debt if needed going forward.
Next Steps:
CIEN has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. In addition to this, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how CIEN has been performing in the past. I suggest you continue to research Ciena to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CIEN’s future growth? Take a look at our free research report of analyst consensus for CIEN’s outlook.
Valuation: What is CIEN 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 CIEN 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.
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