All You Need To Know About Proto Labs Inc’s (NYSE:PRLB) Financial Health
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Proto Labs Inc (NYSE:PRLB), with a market cap of US$4.1b, often get neglected by retail investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Let’s take a look at PRLB’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 Proto Labs’s financial health, so you should conduct further analysis into PRLB here.
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Can PRLB service its debt comfortably?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For Proto Labs, investors should not worry about its debt levels because the company has none! This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with PRLB, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can PRLB pay its short-term liabilities?
Since Proto Labs doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. Looking at PRLB’s most recent US$44m liabilities, it seems that the business has been able to meet these commitments with a current assets level of US$193m, leading to a 4.36x current account ratio. Having said that, a ratio greater than 3x may be considered as quite high, and some might argue PRLB could be holding too much capital in a low-return investment environment.
Next Steps:
PRLB has no debt as well as ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and shareholders, however, some degree of debt may also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure PRLB has company-specific issues impacting its capital structure decisions. I suggest you continue to research Proto Labs to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for PRLB’s future growth? Take a look at our free research report of analyst consensus for PRLB’s outlook.
Valuation: What is PRLB 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 PRLB 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.
