Investors pursuing a solid, dependable stock investment can often be led to BioMarin Pharmaceutical Inc (NASDAQ:BMRN), a large-cap worth US$15.63B. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. But, the key to extending previous success is in the health of the company’s financials. 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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into BMRN here. See our latest analysis for BioMarin Pharmaceutical
How does BMRN’s operating cash flow stack up against its debt?
BMRN’s debt levels surged from US$683.24M to US$1.17B over the last 12 months , which is made up of current and long term debt. With this growth in debt, BMRN currently has US$1.40B remaining in cash and short-term investments for investing 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of BMRN’s operating efficiency ratios such as ROA here.
Does BMRN’s liquid assets cover its short-term commitments?
At the current liabilities level of US$816.52M liabilities, the company has been able to meet these obligations given the level of current assets of US$2.21B, with a current ratio of 2.7x. Usually, for Biotechs companies, this is a suitable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Is BMRN’s debt level acceptable?
With debt reaching 42.15% of equity, BMRN may be thought of as relatively highly levered. This isn’t surprising for large-caps, as equity can often be more expensive to issue than debt, plus interest payments are tax deductible. Consequently, larger-cap organisations tend to enjoy lower cost of capital as a result of easily attained financing, providing an advantage over smaller companies. Though, since BMRN is presently 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.
BMRN’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. However, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how BMRN has been performing in the past. You should 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.