The size of BioMarin Pharmaceutical Inc (NASDAQ:BMRN), a US$17.66b large-cap, often attracts investors seeking a reliable investment in the stock market. Doing business globally, large caps tend to have diversified revenue streams and attractive capital returns, making them desirable investments for risk-averse portfolios. But, the health of the financials determines whether the company continues to succeed. I will provide an overview of BioMarin Pharmaceutical’s financial liquidity and leverage to give you an idea of BioMarin Pharmaceutical’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into BMRN here.
How much cash does BMRN generate through its operations?
Over the past year, BMRN has ramped up its debt from US$676.21m to US$1.19b , which comprises of short- and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at US$1.36b , ready to deploy into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, 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 assess some of BMRN’s operating efficiency ratios such as ROA here.
Can BMRN pay its short-term liabilities?
With current liabilities at US$804.95m, it appears that the company has been able to meet these commitments with a current assets level of US$2.28b, leading to a 2.83x current account ratio. Generally, for Biotechs companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Can BMRN service its debt comfortably?
With a debt-to-equity ratio of 41.30%, BMRN can be considered as an above-average leveraged company. This isn’t uncommon for large companies because interest payments on debt are tax deductible, meaning debt can be a cheaper source of capital than equity. Accordingly, large companies often have lower cost of capital due to easily obtained financing, providing an advantage over smaller companies. But since BMRN is presently unprofitable, 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.
BMRN’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how BMRN has been performing in the past. I suggest you continue to research BioMarin Pharmaceutical to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BMRN’s future growth? Take a look at our free research report of analyst consensus for BMRN’s outlook.
- Valuation: What is BMRN 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 BMRN 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 email@example.com.