Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Clovis Oncology Inc (NASDAQ:CLVS), with a market capitalization of US$3.07B, rarely draw their attention from the investing community. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. CLVS’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into CLVS here. View our latest analysis for Clovis Oncology
Does CLVS generate enough cash through operations?
Over the past year, CLVS has maintained its debt levels at around US$282.41M 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$563.73M , ready to deploy into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. For this article’s sake, I won’t be looking at this today, but you can examine some of CLVS’s operating efficiency ratios such as ROA here.
Does CLVS’s liquid assets cover its short-term commitments?
With current liabilities at US$81.52M, it appears that the company has been able to meet these commitments with a current assets level of US$626.94M, leading to a 7.69x current account ratio. Though, anything above 3x is considered high and could mean that CLVS has too much idle capital in low-earning investments.
Can CLVS service its debt comfortably?
With debt reaching 76.82% of equity, CLVS may be thought of as relatively highly levered. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. But since CLVS is presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
CLVS’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 an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for CLVS’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Clovis Oncology to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CLVS’s future growth? Take a look at our free research report of analyst consensus for CLVS’s outlook.
- Valuation: What is CLVS 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 CLVS 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.