Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as CRISPR Therapeutics AG (NASDAQ:CRSP), with a market capitalization of US$2.36B, rarely draw their attention from the investing community. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Today we will look at CRSP’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into CRSP here. View our latest analysis for CRISPR Therapeutics
Can CRSP service its debt comfortably?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. The good news for investors is that CRISPR Therapeutics has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with CRSP, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does CRSP’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, CRISPR Therapeutics has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. At the current liabilities level of US$22.00M liabilities, the company has been able to meet these commitments with a current assets level of US$320.19M, leading to a 14.56x current account ratio. Though, a ratio greater than 3x may be considered as too high, as CRSP could be holding too much capital in a low-return investment environment.
CRSP has zero-debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, though, some degree of debt could also boost earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure CRSP has company-specific issues impacting its capital structure decisions. You should continue to research CRISPR Therapeutics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CRSP’s future growth? Take a look at our free research report of analyst consensus for CRSP’s outlook.
- Historical Performance: What has CRSP’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.