Shockwave Medical Inc. (NASDAQ:SWAV)

Liquidity Ratios Overview

The liquidity ratios demonstrate notable fluctuations over the analyzed periods, with significant variations suggesting changing cash and current asset positions relative to liabilities.

Current Ratio

The current ratio exhibits a general downward trend from early 2019 through mid-2023, followed by a sharp increase at the end of 2023 and into the first quarter of 2024. Initially very high at 10.37 in March 2019, it decreased fairly steadily to a low near 4.16 in March 2023. However, this ratio rebounded strongly to 13.81 by March 2024. This pattern indicates a considerable improvement in the company's ability to cover short-term liabilities with current assets at the end of the period, after a multi-year decline.

Quick Ratio

The quick ratio follows a similar trend to the current ratio, beginning at 9.72 in March 2019 and declining through much of the timeframe, reaching a low of 3.53 in March 2023. Subsequent quarters show a remarkable recovery with a peak of 12.49 in March 2024. This suggests the company managed to enhance its most liquid assets (excluding inventories) relative to current liabilities, particularly in the latter stages of the timeline.

Cash Ratio

The cash ratio also mirrors the broad trend of the other liquidity metrics, declining from 9.45 in March 2019 to a trough of 2.94 in March 2023. The ratio then surges upwards to 11.15 in March 2024, indicating a substantial increase in cash and cash equivalents relative to current liabilities. The pronounced drop and subsequent rebound suggest significant changes in cash management or cash inflows towards the end of the period.

Summary Insights

Across all three liquidity ratios, the data reveal a prolonged contraction phase lasting approximately four years, followed by a strong recovery in the last four quarters. The sharp increase in liquidity ratios at the end may reflect strategic financial restructuring, improved operational cash flow, asset sales, or capital raising efforts. This improved liquidity position implies enhanced short-term financial health and flexibility entering 2024 relative to prior years.

Current Assets

The current assets exhibit a general upward trend over the observed period from March 2019 to March 2024. Starting at approximately $151.5 million in March 2019, they experienced some fluctuations but increased notably after mid-2021. By March 2024, current assets peaked beyond $1.2 billion, reflecting substantial growth particularly in the last two years. This suggests an expansion in liquid or near-liquid resources available to the entity.

Current Liabilities

The current liabilities also show an upward trend, albeit less consistent compared to current assets. Initially, liabilities were relatively low, around $14.6 million in March 2019, rising steadily to about $52 million by the end of 2021. Afterward, there was a significant increase in liabilities, peaking at roughly $142 million in March 2023 before declining somewhat but remaining elevated at around $92 million in March 2024. The increase in current liabilities indicates higher short-term obligations, particularly over recent years.

Current Ratio

The current ratio demonstrates considerable variability, starting from a high value of approximately 10.4 in March 2019, with some fluctuations but generally trending downward through 2021 to reach lows around 4.1 in early 2023. Despite these mid-period dips, the ratio surged markedly in the last quarters, reaching values above 13 by March 2024. The current ratio consistently remaining well above 1 indicates the company maintains a strong liquidity position, with current assets significantly exceeding current liabilities throughout the period, though the volatility suggests variable management of short-term liquidity.

Total Quick Assets

The total quick assets exhibited a general upward trend over the observed periods, starting at $142,003 thousand in March 2019 and reaching $1,153,673 thousand by March 2024. There was a notable increase in the last four quarters, particularly from March 2023 to March 2024, where the value almost doubled from $501,170 thousand to over $1.15 million thousand. Prior to this surge, the asset levels showed moderate fluctuations, with some declines and recoveries throughout 2019 to 2022, but the overall trend remained positive.

Current Liabilities

Current liabilities showed a less consistent pattern with fluctuations throughout the period. Starting at $14,616 thousand in March 2019 and increasing gradually to $104,205 thousand in December 2023, the liabilities experienced sharp increases in some quarters. Particularly notable was the jump to $141,998 thousand in the first quarter of 2023. After peaking in December 2023, current liabilities slightly decreased to $92,334 thousand in March 2024. The overall trend indicates rising current liabilities over time, which, in combination with asset growth, suggests changes in the company's short-term financial obligations.

Quick Ratio

The quick ratio demonstrated significant variability, indicating fluctuating liquidity conditions. Initially, the ratio was very strong at 9.72 in March 2019, falling to a low of 3.53 in March 2023. This decline over the years reflects periods of relative weakening in liquidity. However, a substantial recovery occurred in the last year, with the quick ratio rising sharply to 12.49 by March 2024. This sharp increase aligns with the surge in total quick assets, implying improved short-term financial stability. Despite fluctuations, the quick ratio mostly stayed well above 1.0, suggesting the company maintained adequate liquid assets relative to liabilities throughout the period.

Overall Analysis

The data reflects a company experiencing growth in liquid assets accompanied by rising current liabilities, with liquidity ratios showing periods of both tightening and strengthening. The recent large increase in quick assets and the quick ratio may indicate a strategic accumulation of liquid resources and improved capacity to meet short-term obligations. Volatility in current liabilities warrants attention, as it may impact short-term financial management. The improving quick ratio towards the end of the period suggests strengthened liquidity resilience.

The financial data reveals several key trends in liquidity and working capital management over the observed periods.

Total Cash Assets

Total cash assets experienced fluctuations, beginning at approximately $138 million in early 2019 and declining to around $114 million by the third quarter of 2019. A notable increase occurred in the fourth quarter of 2019, reaching nearly $195 million, followed by variability through 2020. From 2021 onwards, there was a general upward trend, with cash assets rising markedly starting from the first quarter of 2023. By the first quarter of 2024, cash reserves had surged significantly, exceeding $1 billion, indicating a strong strengthening of cash positions in the most recent periods.

Current Liabilities

Current liabilities showed an overall increasing trend across the timeframe. Starting at roughly $14.6 million in the first quarter of 2019, liabilities increased steadily with periodic spikes, notably reaching over $141 million by the first quarter of 2023. The figures moderated somewhat in the following quarters but remained elevated compared to earlier years, closing at approximately $92 million in the first quarter of 2024. This pattern suggests growing short-term obligations, albeit with some volatility in the most recent year.

Cash Ratio

The cash ratio, which measures the ability to cover current liabilities with cash assets, generally declined from a high level of 9.45 in the first quarter of 2019 to a low near 2.94 in the first quarter of 2023. Despite this decline over several years, the ratio demonstrated significant recovery thereafter, climbing steeply to values above 11 in early 2024. This rebound in cash ratio, coupled with the substantial increase in cash assets, indicates a marked improvement in liquidity and the company's capacity to cover short-term liabilities with cash equivalents.

In summary, while current liabilities increased over the reviewed period, the enhancement in cash assets, especially the sharp rise in recent quarters, improved the cash ratio significantly. The most recent data points depict a strong liquidity position, suggesting increased financial flexibility and ability to meet short-term obligations.