Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) with a market-capitalization of US$2.39b, rarely draw their attention. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. This article will examine MDRX’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into MDRX here.
How much cash does MDRX generate through its operations?
MDRX’s debt levels surged from US$1.35b to US$1.65b over the last 12 months , which is made up of current and long term debt. With this rise in debt, the current cash and short-term investment levels stands at US$135.85m for investing into the business. Moreover, MDRX has generated US$236.60m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 14.37%, indicating that MDRX’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses as traditional metrics such as return on asset (ROA) requires positive earnings. In MDRX’s case, it is able to generate 0.14x cash from its debt capital.
Can MDRX pay its short-term liabilities?
Looking at MDRX’s most recent US$907.17m liabilities, it seems that the business has not been able to meet these commitments with a current assets level of US$855.66m, leading to a 0.94x current account ratio. which is under the appropriate industry ratio of 3x.
Does MDRX face the risk of succumbing to its debt-load?
Since total debt levels have outpaced equities, MDRX is a highly leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since MDRX is currently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
With a high level of debt on its balance sheet, MDRX could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for MDRX to increase its operational efficiency. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for MDRX’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Allscripts Healthcare Solutions to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MDRX’s future growth? Take a look at our free research report of analyst consensus for MDRX’s outlook.
- Valuation: What is MDRX 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 MDRX 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.
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 firstname.lastname@example.org.