Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Exact Sciences Corporation (NASDAQ:EXAS), with a market cap of US$6.19b, often get neglected by retail investors. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. EXAS’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 EXAS here.
How much cash does EXAS generate through its operations?
EXAS’s debt levels surged from US$6.23m to US$654.59m over the last 12 months , which comprises of short- and long-term debt. With this increase in debt, EXAS’s cash and short-term investments stands at US$1.22b , ready to deploy into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can take a look at some of EXAS’s operating efficiency ratios such as ROA here.
Can EXAS pay its short-term liabilities?
At the current liabilities level of US$82.96m liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$1.31b, leading to a 15.79x current account ratio. However, anything above 3x is considered high and could mean that EXAS has too much idle capital in low-earning investments.
Can EXAS service its debt comfortably?
With a debt-to-equity ratio of 87.94%, EXAS can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since EXAS is presently unprofitable, 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.
At its current level of cash flow coverage, EXAS has room for improvement to better cushion for events which may require debt repayment. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure EXAS has company-specific issues impacting its capital structure decisions. I suggest you continue to research Exact Sciences to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EXAS’s future growth? Take a look at our free research report of analyst consensus for EXAS’s outlook.
- Valuation: What is EXAS 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 EXAS 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.