Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Enbridge Income Fund Holdings Inc (TSE:ENF) with a market-capitalization of CA$5.15b, rarely draw their attention. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at ENF’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 Enbridge Income Fund Holdings’s financial health, so you should conduct further analysis into ENF here. Check out our latest analysis for Enbridge Income Fund Holdings
Does ENF 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. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For Enbridge Income Fund Holdings, investors should not worry about its debt levels because the company has none! It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with ENF, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does ENF’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, Enbridge Income Fund Holdings has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of CA$31.00m liabilities, the company has been able to meet these obligations given the level of current assets of CA$131.00m, with a current ratio of 4.23x. Though, anything above 3x is considered high and could mean that ENF has too much idle capital in low-earning investments.
ENF has no debt as well as ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, but some level of debt may also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure ENF has company-specific issues impacting its capital structure decisions. I recommend you continue to research Enbridge Income Fund Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ENF’s future growth? Take a look at our free research report of analyst consensus for ENF’s outlook.
- Valuation: What is ENF 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 ENF 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.