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$2.0b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Let’s take a look at CRSP’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. 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.
Is CRSP’s debt level acceptable?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. The good news for investors is that CRISPR Therapeutics has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. 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?
Since CRISPR Therapeutics doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. Looking at CRSP’s US$28m in current liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$466m, leading to a 16.81x current account ratio. Having said that, many consider a ratio above 3x to be high.
CRSP has zero-debt as well as ample cash to cover its near-term liabilities. Its safe operations reduces risk for the company and its investors, though, some degree of debt may also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for CRSP’s financial health. Other important fundamentals need to be considered alongside. I suggest you 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.