The size of Sun Pharmaceutical Industries Limited (NSEI:SUNPHARMA), a ₹1.23T large-cap, often attracts investors seeking a reliable investment in the stock market. Doing business globally, large caps tend to have diversified revenue streams and attractive capital returns, making them desirable investments for risk-averse portfolios. But, the health of the financials determines whether the company continues to succeed. This article will examine Sun Pharmaceutical Industries’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending 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 SUNPHARMA here. See our latest analysis for Sun Pharmaceutical Industries
How does SUNPHARMA’s operating cash flow stack up against its debt?
SUNPHARMA has built up its total debt levels in the last twelve months, from ₹84.97B to ₹98.32B – this includes both the current and long-term debt. With this growth in debt, SUNPHARMA’s cash and short-term investments stands at ₹154.68B for investing into the business. On top of this, SUNPHARMA has produced cash from operations of ₹70.82B over the same time period, leading to an operating cash to total debt ratio of 72.03%, indicating that SUNPHARMA’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In SUNPHARMA’s case, it is able to generate 0.72x cash from its debt capital.
Can SUNPHARMA pay its short-term liabilities?
With current liabilities at ₹178.87B, the company has been able to meet these commitments with a current assets level of ₹329.54B, leading to a 1.84x current account ratio. Generally, for Pharmaceuticals companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is SUNPHARMA’s debt level acceptable?
SUNPHARMA’s level of debt is appropriate relative to its total equity, at 27.90%. This range is considered safe as SUNPHARMA is not taking on too much debt obligation, which may be constraining for future growth.
SUNPHARMA’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. This is only a rough assessment of financial health, and I’m sure SUNPHARMA has company-specific issues impacting its capital structure decisions. You should continue to research Sun Pharmaceutical Industries to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SUNPHARMA’s future growth? Take a look at our free research report of analyst consensus for SUNPHARMA’s outlook.
- Valuation: What is SUNPHARMA 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 SUNPHARMA 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.