Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like World Wrestling Entertainment Inc (NYSE:WWE), with a market cap of US$3.16B, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine WWE’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into WWE here. View our latest analysis for World Wrestling Entertainment
How does WWE’s operating cash flow stack up against its debt?
WWE’s debt levels surged from US$202.73M to US$213.50M over the last 12 months , which comprises of short- and long-term debt. With this increase in debt, WWE’s cash and short-term investments stands at US$297.44M for investing into the business. On top of this, WWE has generated US$96.59M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 45.24%, signalling that WWE’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In WWE’s case, it is able to generate 0.45x cash from its debt capital.
Can WWE pay its short-term liabilities?
At the current liabilities level of US$138.19M liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.83x. For Media companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can WWE service its debt comfortably?
With a debt-to-equity ratio of 77.54%, WWE can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can test if WWE’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For WWE, the ratio of 9.3x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as WWE’s high interest coverage is seen as responsible and safe practice.