uploads/2015/10/EMC3.png

EMC’s Cash-To-Debt Ratio Is 1x: How Does It Compare?

By

Updated

Cash-to-debt ratio

Cash-to-debt ratio measures the financial strength of a company. EMC’s (EMC) cash-to-debt ratio in 2Q15 is 1x, which is lower than the industry median of 1.4x.

EMC’s operating income for 1Q16 was $680 million and interest expense was $41 million. The company’s interest coverage ratio, which determines how easily a company can pay interest expenses on outstanding debt, is 16.6x in 2Q15.

Article continues below advertisement

Current and quick ratio

EMC’s current ratio is 1.1x lower than the industry median of 1.9x, whereas the firm’s quick ratio is 1x, compared with the industry median of 1.4x. Current and quick ratios measure a company’s ability to pay short-term obligations.

Price-to-earnings, price-to-book value, and price-to-sales ratios

As we can see in the above chart, EMC’s price-to-earnings ratio is 21.1x, higher than the industry median of 16.3x. Its price-to-book value and price-to-sales are 2.4x and 2.1x, respectively, compared with the industry median of 1.4x and 0.8x, respectively. In comparison, the price-to-earnings ratios of peer companies NetApp (NTAP) and Symantec (SYMC) are 21.7x and 19.2x, respectively.

Dividend and share buyback

EMC’s trailing annual dividend yield is 1.8, compared with the industry median of 2.3. Dividend yield measures how much a company pays out in dividends each year relative to its share price. EMC’s average share buyback ratio is 2.6x, compared with the industry median of -1.3x. EMC comprises 1.3% of the Technology Select Sector SPDR ETF (XLK) and 0.3% of the SPDR S&P 500 ETF (SPY).

Advertisement

More From Market Realist