Cerence Story

CRNC -- USA Stock

USD 105.44 5.68 5.11%

Macroaxis Story

Cerence is scheduled to announce its earnings tomorrow. Cerence Earnings Before Interest Taxes and Depreciation Amortization EBITDA are projected to decrease significantly based on the last few years of reporting. The past year's Earnings Before Interest Taxes and Depreciation Amortization EBITDA were at 23.97 Million. The current year Average Equity is expected to grow to about 863 M, whereas Average Assets are forecasted to decline to about 1.8 B. As many millenniums are trying to avoid technology space, it makes sense to go over Cerence a little further and try to understand its current market patterns. Let's try to analyze if Cerence shares are reasonably priced going into March.

Published over two weeks ago

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What is March outlook for Cerence (NASDAQ:CRNC)?

This firm currently holds 298 M in liabilities with Debt to Equity (D/E) ratio of 0.31, which is about average as compared to similar companies. The company has a current ratio of 1.22, suggesting that it is in a questionable position to pay out its financial obligations when due.

Cerence financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Cerence, including all of Cerence's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Cerence assets, the company is considered highly leveraged. Understanding the composition and structure of overall Cerence debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it.

Please read more on our technical analysis page.

Understanding Cerence Total Debt

Cerence liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Cerence has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Cerence balance sheet include debt obligations and money owed to different Cerence vendors, workers, and loan providers. Below is the chart of Cerence main long-term debt accounts currently reported on its balance sheet.

You can use Cerence financial leverage analysis tool to get a better grip on understanding its financial position

How important is Cerence's Liquidity

Cerence financial leverage refers to using borrowed capital as a funding source to finance Cerence ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Cerence financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Cerence's total debt and its cash.

What do experts say?

Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions.

It is good to see analyst projects for Cerence, but it might be worth checking our own buy vs. sell analysis

Sale by Dhawan Sanjay of 9 shares of Cerence

Legal trades by Cerence insiders are very common, as founders, directors, or employees of any publicly traded firm often have stock or stock options. These trades are made public in the United States through the filing of Form 4 of the Securities and Exchange Commission. Below entry was recorded recently and is publicly available as an insider trade:

Cerence insider trading alert for sale of common stock by Dhawan Sanjay, Chief Executive Officer, on 24th of February 2021. This event was filed by Cerence Inc with SEC on 2021-02-24. Statement of changes in beneficial ownership - SEC Form 4 [view details]

Note, although insider trading is legal, in the United States, Canada, Australia, and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors, and any beneficial owners of more than 10% of a class of the company's equity securities.

Breaking it down a bit more

The current price rise of Cerence could raise concerns from investors as the firm it trading at a share price of 125.67 on very low momentum in volume. The company directors and management may have good odds in positioning the firm resources to exploit market volatility in March. The stock standard deviation of daily returns for 30 days investing horizon is currently 4.37. This high volatility is attributed to the latest market swings and not so good earnings reports for some of the Cerence partners.

Liabilities Breakdown

194 M

Current Liabilities

498.9 M

Long-Term Liabilities

	Total Liabilities	692.9 Million
	Current Liabilities	193.98 Million
	Long-Term Liabilities	498.92 Million

Are Cerence technical ratios showing a bounce back?

Current variance is at 18.03. Cerence shows above-average downside volatility for the selected time horizon. We advise investors to inspect Cerence further and ensure that all market timing and asset allocation strategies are consistent with the estimation of Cerence future alpha.

Our Conclusion on Cerence

Whereas other entities under the software?application industry are still a bit expensive, Cerence may offer a potential longer-term growth to investors. The inconsistency in the assessment between current Cerence valuation and our trade advice on Cerence is due to the recent market swings and your selection of investing horizon. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Cerence.

About Contributor

Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of Cerence. Please refer to our Terms of Use for any information regarding our disclosure principles.

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