Stocks with market capitalization between $2B and $10B, such as The Hain Celestial Group, Inc. (NASDAQ:HAIN) with a size of US$2.3b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. HAIN’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into HAIN here.
HAIN’s Debt (And Cash Flows)
HAIN’s debt levels have fallen from US$767m to US$728m over the last 12 months , which includes long-term debt. With this debt payback, HAIN’s cash and short-term investments stands at US$38m , ready to be used for running the business. Additionally, HAIN has produced cash from operations of US$79m in the last twelve months, resulting in an operating cash to total debt ratio of 11%, indicating that HAIN’s current level of operating cash is not high enough to cover debt.
Can HAIN meet its short-term obligations with the cash in hand?
With current liabilities at US$439m, it seems that the business has been able to meet these obligations given the level of current assets of US$951m, with a current ratio of 2.17x. The current ratio is calculated by dividing current assets by current liabilities. For Food companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can HAIN service its debt comfortably?
With debt reaching 46% of equity, HAIN may be thought of as relatively highly levered. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since HAIN is currently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Although HAIN’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around HAIN’s liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for HAIN’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Hain Celestial Group to get a better picture of the mid-cap by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HAIN’s future growth? Take a look at our free research report of analyst consensus for HAIN’s outlook.
- Valuation: What is HAIN 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 HAIN 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.