Some say that volatility is the best way to think about risk as an investor, rather than liability, but Warren Buffett famously said, “Volatility is not synonymous with risk.” So smart rich people seem to know that debt (usually associated with bankruptcy) is a very important factor in assessing a company’s risk.Like many other companies Edwards Life Science Corporation (NYSE:EW) takes on debt. But the bigger question is how much risk does that liability create?
Why Debt Brings Risk?
Debt helps a business until it struggles to pay it back with either new capital or free cash flow. there is. But a more common (but still costly) situation is when a company has to dilute its shareholders with a cheap stock price just to manage its debt. But by displacing dilution, debt can become a very good tool for companies that need capital to invest in growth at a high rate of return. The first thing to do when considering what you are using is to look at cash and debt together.
See the latest analysis from Edwards Lifesciences.
What is Edwards Lifesciences’ net debt?
As shown below, Edwards Lifesciences has a debt of US$596.2 million as of September 2022, which is about the same as the previous year. Click the graph to see details. But we also have $1.74 billion in cash to offset it. That means we have $1.14 billion in net cash.
Overview of Edwards Lifesciences Debt
According to the latest balance sheet data, Edwards Lifesciences has $917.9 million of debt due within one year and $1.5 billion of debt after that. Offsetting this was cash of $1.74 billion and accounts receivable of $661.4 million that were due within 12 months. Therefore, these current assets roughly match total liabilities.
This situation shows that Edwards LifeSciences’ balance sheet is very strong. This is because total liabilities are approximately equal to current assets. It’s hard to imagine a US$45.5bn company suffering from cash shortages, but we think it’s worth keeping an eye on its balance sheet. Although we have notable debt, Edwards Lifesciences has more cash than debt and we are confident that we can safely manage our debt.
The good news is that Edwards Lifesciences increased EBIT by 7.7% in 12 months. This should ease concerns about debt repayment. Clearly, the balance sheet is the starting point when analyzing debt levels. Ultimately, however, the future profitability of the business will determine whether Edwards Lifesciences can strengthen its balance sheet over time. So, if you want to know what the experts think, this free report on analyst profit forecasts might be of interest to you.
But a final consideration is also important. Because a company cannot pay its debts with paper profits. I need cash. Edwards Lifesciences may have net cash on its balance sheet, but it’s still interesting to see how the business converts earnings before interest (EBIT) into free cash flow. manage debt. In the last three years, Edwards LifeSciences posted free cash flow equivalent to his 68% of his EBIT. Given that free cash flow excludes interest and taxes, this is mostly normal. This cold cash means you can reduce your debt when you need it.
We can understand if investors are concerned about Edwards Lifesciences’ debt, but the fact that it has $1.14 billion in net cash is comforting. We were also impressed by his US$1 billion free cash flow, which represents his 68% of EBIT. Therefore, we believe there is no risk in using Edwards Lifesciences’ debt. Another factor that puts trust in Edwards Lifesciences is when insiders buy stock. If you’re aware of that signal, click this link and you’ll know right away.
After all, it is often better to focus on companies with no net debt. Access a special list of such companies (all with a track record of profit growth). It’s free.
What are the risks and opportunities edwards life sciences?
Edwards Lifesciences Corporation provides products and technologies for structural heart disease, critical care and surgical monitoring in the United States, Europe, Japan and internationally.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …