Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as National Beverage Corp. (NASDAQ:FIZZ), with a market capitalization of US$2.6b, rarely draw their attention from the investing community. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. FIZZ’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Don’t forget that this is a general and concentrated examination of National Beverage’s financial health, so you should conduct further analysis into FIZZ here.
Is FIZZ’s debt level acceptable?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For FIZZ, the debt-to-equity ratio is zero, meaning that the company has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with FIZZ, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can FIZZ meet its short-term obligations with the cash in hand?
Since National Beverage doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. Looking at FIZZ’s US$223m in current liabilities, the company has been able to meet these obligations given the level of current assets of US$430m, with a current ratio of 1.93x. The current ratio is calculated by dividing current assets by current liabilities. Usually, for Beverage companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
FIZZ has zero-debt in addition to ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and its investors, though, some degree of debt could also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for FIZZ’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research National Beverage to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FIZZ’s future growth? Take a look at our free research report of analyst consensus for FIZZ’s outlook.
- Valuation: What is FIZZ 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 FIZZ 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.