Latest Zynga Inc. (ZNGA) company news
Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Zynga Inc (NASDAQ:ZNGA), with a market cap of US$3.37b, are often out of the spotlight. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Today we will look at ZNGA’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Don’t forget that this is a general and concentrated examination of Zynga’s financial health, so you should conduct further analysis into ZNGA here.
Does ZNGA face the risk of succumbing to its debt-load?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For ZNGA, the debt-to-equity ratio is zero, meaning that the company has no debt. 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 ZNGA, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can ZNGA pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Zynga has no solvency issues, which is 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. At the current liabilities level of US$269.7m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.01x. Generally, for Software companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
ZNGA has no debt in addition to ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and its investors, though, some level of debt could also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for ZNGA’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Zynga to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ZNGA’s future growth? Take a look at our free research report of analyst consensus for ZNGA’s outlook.
- Valuation: What is ZNGA 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 ZNGA 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 [email protected].
In the chart below, we can see that Take-Two Interactive (TTWO) has outlined its growth projections in the global games market. The gaming industry is estimated to grow from $123.0 billion in 2017 to $137.0 billion in 2018 and might reach $166.0 billion by the end of 2022. Take-Two Interactive and its peers Activision Blizzard (ATVI), Electronic Arts (EA), and Zynga (ZNGA) have an opportunity to drive revenues in a growing market.
Among its peers, Electronic Arts (EA), Activision Blizzard (ATVI), and Zynga (ZNGA) expect to see their revenues rise 2.8%, 16.3%, and 20.0%, respectively, in the 2018 holiday season. The holiday season is a key revenue driver not just for consumer and electronic companies, but also for gaming companies.
Take-Two Interactive (TTWO) stock was trading at $12.00 at the start of 2013. That year, the gaming company’s stock price rose 44.0% to $17.60. Take-Two stock rose 59.0% in 2014, 24.0% in 2015, and 41.0% in 2016 to $49.29.
Score: Neutral (41)
10 days at current score.
Downgraded from Positive on September 4th 2018
- This company ranked neutral compared to the Technology sector with only 1 positive IHS Markit Category
- Bearish sentiment is low
- Economic output for the sector is expanding but at a slower rate
Short interest | Positive
Short interest is extremely low for ZNGA with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting ZNGA.
ETF/Index ownership | Neutral
ETF activity is neutral. The net inflows of $1.51 billion over the last one-month into ETFs that hold ZNGA are not among the highest of the last year and have been slowing.
PMI by IHS Markit | Negative
According to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Technology sector is rising. The rate of growth is weak relative to the trend shown over the past year, however, and is easing.
Credit default swap
CDS data is not available for this security.
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