What does AxoGen Inc's (NASDAQ:AXGN) Balance Sheet Tell Us About Its Future?

Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as AxoGen Inc (NASDAQ:AXGN), with a market capitalization of US$2.08b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Let’s take a look at AXGN’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into AXGN here.

Check out our latest analysis for AxoGen

How does AXGN’s operating cash flow stack up against its debt?

Over the past year, AXGN has maintained its debt levels at around US$24.59m – this includes both the current and long-term debt. At this current level of debt, AXGN currently has US$30.56m remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can take a look at some of AXGN’s operating efficiency ratios such as ROA here.

Can AXGN pay its short-term liabilities?

At the current liabilities level of US$15.57m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of US$51.73m, with a current ratio of 3.32x. However, a ratio greater than 3x may be considered as too high, as AXGN could be holding too much capital in a low-return investment environment.

Does AXGN face the risk of succumbing to its debt-load?

AXGN is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. Though, since AXGN is currently loss-making, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Next Steps:

At its current level of cash flow coverage, AXGN has room for improvement to better cushion for events which may require debt repayment. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how AXGN has been performing in the past. You should continue to research AxoGen to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for AXGN’s future growth? Take a look at our free research report of analyst consensus for AXGN’s outlook.
2. Valuation: What is AXGN 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 AXGN 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.