Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Incyte Corporation (NASDAQ:INCY). With a market valuation of $28.44B, INCY is a safe haven in times of market uncertainty due to its strong balance sheet. These stocks are resilient in times of low liquidity and are relatively unimpacted by interest rate hikes. Today I will analyse the latest financial data for INCY to determine is solvency and liquidity and whether the stock is a sound investment. Check out our latest analysis for Incyte
Does INCY face the risk of succumbing to its debt-load?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. Generally, large-cap stocks are considered financially healthy if its ratio is below 40%. In the case of INCY, the debt-to-equity ratio is 2.28%, which means debt is low and does not pose any significant threat to the company’s operations.
Does INCY generate an acceptable amount of cash through operations?
A simple way to determine whether the company has put debt into good use is to look at its operating cash flow against its debt obligation. This also assesses INCY’s debt repayment capacity, which is not a big concern for a large company. In the case of INCY, operating cash flow over the past twelve months do cover its current debt,which means INCY generates enough money in a year through its operations to pay off its near-term debt. Hence, debt poses a virtually insignificant risk for the company.This is great news for both debtholders and shareholders, as the company exhibits cautious cash and debt management.
INCY’s high cash coverage and low levels of debt indicate its ability to use its borrowings efficiently in order to produce a healthy cash flow. This is nothing less than what we would expect from such a large company such as Incyte. Investors tend to gravitate towards these stocks purely for their stability and liquidity. Though, there are other factors we should also consider before buying INCY, such as its valuation. Now that you know to keep debt in mind when putting together your investment thesis, I recommend you check out our latest free analysis report on Incyte to see what other factors for INCY you should consider.
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