Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Triton International Limited (NYSE:TRTN), with a market capitalization of US$2.56B, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Let’s take a look at TRTN’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into TRTN here. Check out our latest analysis for Triton International

Does TRTN generate an acceptable amount of cash through operations?

TRTN has built up its total debt levels in the last twelve months, from US$6.36B to US$6.91B – this includes both the current and long-term debt. With this rise in debt, TRTN’s cash and short-term investments stands at US$139.41M for investing into the business. On top of this, TRTN has generated cash from operations of US$806.80M in the last twelve months, leading to an operating cash to total debt ratio of 11.67%, signalling that TRTN’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In TRTN’s case, it is able to generate 0.12x cash from its debt capital.

Does TRTN’s liquid assets cover its short-term commitments?

At the current liabilities level of US$240.64M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of US$772.51M, with a current ratio of 3.21x. Though, a ratio greater than 3x may be considered as too high, as TRTN could be holding too much capital in a low-return investment environment.

Does TRTN face the risk of succumbing to its debt-load?

TRTN is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In TRTN’s case, the ratio of 1.9x suggests that interest is not strongly covered, which means that debtors may be less inclined to loan the company more money, reducing its headroom for growth through debt.