With a market capitalization of US$16b, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high liquidity, which means there’s plenty of stocks available to the public for trading. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Assessing the most recent data for BMRN, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity.
BMRN’s Debt (And Cash Flows)
BMRN’s debt levels have fallen from US$1.2b to US$830m over the last 12 months , which includes long-term debt. With this debt repayment, BMRN currently has US$1.1b remaining in cash and short-term investments , ready to be used for running the business. On top of this, BMRN has generated cash from operations of US$20m in the last twelve months, leading to an operating cash to total debt ratio of 2.4%, meaning that BMRN’s current level of operating cash is not high enough to cover debt.
Does BMRN’s liquid assets cover its short-term commitments?
With current liabilities at US$523m, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.93x. The current ratio is calculated by dividing current assets by current liabilities. However, many consider a ratio above 3x to be high.
Can BMRN service its debt comfortably?
BMRN’s level of debt is appropriate relative to its total equity, at 28%. This range is considered safe as BMRN is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is very low with BMRN, and the company has plenty of headroom and ability to raise debt should it need to in the future.
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. This is only a rough assessment of financial health, and I’m sure BMRN has company-specific issues impacting its capital structure decisions. 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.
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