Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Esperion Therapeutics Inc (NASDAQ:ESPR), with a market capitalization of US$2.06B, 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. This article will examine ESPR’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into ESPR here. See our latest analysis for Esperion Therapeutics
Does ESPR generate enough cash through operations?
Over the past year, ESPR has reduced its debt from US$2.73M to US$1.05M , which comprises of short- and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at US$200.20M , ready to deploy 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 ESPR’s operating efficiency ratios such as ROA here.
Can ESPR meet its short-term obligations with the cash in hand?
With current liabilities at US$33.14M, the company has been able to meet these obligations given the level of current assets of US$203.92M, with a current ratio of 6.15x. Though, anything above 3x is considered high and could mean that ESPR has too much idle capital in low-earning investments.
Is ESPR’s debt level acceptable?
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 Esperion Therapeutics has virtually no debt. This means it has been running its business utilising funding from primarily its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with ESPR, and the company has plenty of headroom and ability to raise debt should it need to in the future.
ESPR’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. I admit this is a fairly basic analysis for ESPR’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Esperion Therapeutics to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ESPR’s future growth? Take a look at our free research report of analyst consensus for ESPR’s outlook.
- Historical Performance: What has ESPR’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.