Yahoo Finance Is Tiffany & Co’s (NYSE:TIF) Liquidity Good Enough?
Tiffany & Co (NYSE:TIF), a large-cap worth US$14.9b, comes to mind for investors seeking a strong and reliable stock investment. Most investors favour these big stocks due to their strong balance sheet and high market liquidity, meaning there are an abundance of stock in the public market available for trading. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Today I will analyse the latest financial data for TIF to determine is solvency and liquidity and whether the stock is a sound investment.
See our latest analysis for Tiffany
How does TIF’s operating cash flow stack up against its debt?
TIF’s debt levels have fallen from US$1.1b to US$972m over the last 12 months , which comprises of short- and long-term debt. With this debt payback, TIF currently has US$814m remaining in cash and short-term investments , ready to deploy into the business. On top of this, TIF has produced US$736m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 76%, indicating that TIF’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In TIF’s case, it is able to generate 0.76x cash from its debt capital.
Can TIF meet its short-term obligations with the cash in hand?
With current liabilities at US$610m, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 6.05x. Having said that, many consider anything above 3x to be quite high and could mean that TIF has too much idle capital in low-earning investments.
Is TIF’s debt level acceptable?
With debt at 32% of equity, TIF may be thought of as appropriately levered. This range is considered safe as TIF is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether TIF is able to meet its debt obligations by looking at the net interest coverage ratio. Preferably, earnings before interest and tax (EBIT) should be at least three times as large as net interest. For TIF, the ratio of 21.13x suggests that interest is comfortably covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes TIF and other large-cap investments thought to be safe.
Next Steps:
TIF’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how TIF has been performing in the past. You should continue to research Tiffany to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TIF’s future growth? Take a look at our free research report of analyst consensus for TIF’s outlook.
Valuation: What is TIF 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 TIF 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
