Is Ping Identity Holding (NYSE: PING) Using Too Much Debt?

0


Berkshire Hathaway’s Charlie Munger-backed external fund manager Li Lu is quick to say “The biggest risk in investing is not price volatility, but suffering a permanent loss of capital.” . So it can be obvious that you need to consider debt, when you think about how risky a given stock is because too much debt can sink a business. Above all, Ping Identity Holding Corp. (NYSE: PING) carries debt. But the real question is whether this debt makes the business risky.

What risk does debt entail?

Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that he must raise new equity at low cost, thereby diluting shareholders over the long term. By replacing dilution, however, debt can be a very good tool for companies that need capital to invest in growth at high rates of return. The first step in examining a company’s debt levels is to consider its cash flow and debt together.

What is the debt of Ping Identity Holding?

As you can see below, Ping Identity Holding had debt of US $ 119.2 million in September 2021, up from US $ 149.0 million the year before. On the other hand, it has $ 51.0 million in cash, resulting in net debt of around $ 68.2 million.

NYSE: PING History of Debt to Equity November 5, 2021

A look at the liabilities of Ping Identity Holding

We can see from the most recent balance sheet that Ping Identity Holding had liabilities of US $ 81.7 million maturing within one year and liabilities of US $ 145.9 million maturing within one year. of the. On the other hand, it had $ 51.0 million in cash and $ 130.7 million in less than one year receivables. As a result, its liabilities exceed the sum of its cash and (short-term) receivables by $ 45.9 million.

This state of affairs indicates that Ping Identity Holding’s balance sheet looks quite strong, as its total liabilities roughly equal its cash. So the $ 2.34 billion company is highly unlikely to run out of cash, but it’s still worth keeping an eye on the balance sheet. When analyzing debt levels, the balance sheet is the obvious starting point. But it is future profits, more than anything, that will determine Ping Identity Holding’s ability to maintain a healthy balance sheet going forward. So, if you want to see what the professionals think, you might find this free analyst earnings forecast report interesting.

Over the past year, Ping Identity Holding has not been profitable in EBIT, but has managed to increase its revenue by 16%, to US $ 287 million. This rate of growth is a bit slow for our taste, but it takes all types to make a world.

Emptor Warning

During the last twelve months, Ping Identity Holding recorded a loss of profit before interest and taxes (EBIT). Indeed, it lost US $ 61 million in EBIT. Considering that besides the liabilities mentioned above, we are not convinced that the company should use so much debt. We therefore believe that its record is a bit strained, but not irreparable. We’d be better off if he turned his twelve-month, $ 42 million loss into profit. So, to be frank, we think it’s risky. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks lie on the balance sheet – far from it. Note that Ping Identity Holding displays 1 warning sign in our investment analysis , you must know…

If, after all of this, you’re more interested in a fast-growing company with a strong balance sheet, take a quick look at our list of cash-flow net-growth stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Leave A Reply

Your email address will not be published.