Mid-caps stocks, like Aerie Pharmaceuticals Inc (NASDAQ:AERI) with a market capitalization of US$2.25B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. 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. Let’s take a look at AERI’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into AERI here. See our latest analysis for Aerie Pharmaceuticals
Does AERI generate enough cash through operations?
AERI’s debt level has been constant at around US$123.85M over the previous year made up of current and long term debt. At this current level of debt, the current cash and short-term investment levels stands at US$249.66M 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 examine some of AERI’s operating efficiency ratios such as ROA here.
Can AERI meet its short-term obligations with the cash in hand?
With current liabilities at US$25.18M, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 10.09x. However, a ratio greater than 3x may be considered as too high, as AERI could be holding too much capital in a low-return investment environment.
Does AERI face the risk of succumbing to its debt-load?
AERI is a relatively highly levered company with a debt-to-equity of 91.33%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. However, since AERI is currently unprofitable, there’s a question of sustainability of its current operations. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
AERI’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how AERI has been performing in the past. You should continue to research Aerie Pharmaceuticals to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AERI’s future growth? Take a look at our free research report of analyst consensus for AERI’s outlook.
- Valuation: What is AERI 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 AERI 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.