Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Immunomedics Inc (NASDAQ:IMMU), with a market cap of US$3.62B, often get neglected by retail investors. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. Today we will look at IMMU’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 commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into IMMU here. See our latest analysis for Immunomedics
Does IMMU generate enough cash through operations?
IMMU has sustained its debt level by about US$98.08M over the last 12 months made up of current and long term debt. At this current level of debt, IMMU currently has US$154.90M remaining in cash and short-term investments , 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 assess some of IMMU’s operating efficiency ratios such as ROA here.
Can IMMU pay its short-term liabilities?
At the current liabilities level of US$122.24M liabilities, it appears that the company has been able to meet these commitments with a current assets level of US$157.30M, leading to a 1.29x current account ratio. For Biotechs companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can IMMU service its debt comfortably?
IMMU is a highly-leveraged company with debt exceeding equity by over 100%. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. But since IMMU is currently unprofitable, sustainability of its current state of operations becomes a concern. 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, IMMU has room for improvement to better cushion for events which may require debt repayment. Though, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for IMMU’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Immunomedics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IMMU’s future growth? Take a look at our free research report of analyst consensus for IMMU’s outlook.
- Valuation: What is IMMU 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 IMMU 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.