Has MorphoSys AG (ETR:MOR) Got Enough Cash?

Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as MorphoSys AG (ETR:MOR), with a market capitalization of €3.62b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Today we will look at MOR’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. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into MOR here.

Check out our latest analysis for MorphoSys

Does MOR produce enough cash relative to debt?

MOR has shrunken its total debt levels in the last twelve months, from €218.29k to €87.79k , which is made up of current and long term debt. With this reduction in debt, the current cash and short-term investment levels stands at €285.76m , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of MOR’s operating efficiency ratios such as ROA here.

Can MOR pay its short-term liabilities?

Looking at MOR’s most recent €42.67m liabilities, it appears that the company has been able to meet these commitments with a current assets level of €318.05m, leading to a 7.45x current account ratio. Though, anything above 3x is considered high and could mean that MOR has too much idle capital in low-earning investments.

Can MOR service its debt comfortably?

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, mid-cap stocks are considered financially healthy if its ratio is below 40%. For MorphoSys, investors should not worry about its debt levels because the company has very, very little on its balance sheet! It has been operating its business with miniscule debt and utilising only its equity capital. Investors' risk associated with debt is virtually non-existent with MOR, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Next Steps:

MOR’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven't considered other factors such as how MOR has been performing in the past. I recommend you continue to research MorphoSys to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for MOR’s future growth? Take a look at our free research report of analyst consensus for MOR’s outlook.
2. Valuation: What is MOR 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 MOR is currently mispriced by the market.
3. 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 editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.