Stocks with market capitalization between $2B and $10B, such as Immunomedics, Inc. (NASDAQ:IMMU) with a size of US$3.5b, do not attract as much attention from the investing community as do the small-caps and large-caps. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. This article will examine IMMU’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into IMMU here.
IMMU’s Debt (And Cash Flows)
Over the past year, IMMU has reduced its debt from US$20m to US$7.1m , which also accounts for long term debt. With this reduction in debt, IMMU’s cash and short-term investments stands at US$498m to keep the business going. Moving on, operating cash flow was negative over the last twelve months. 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 IMMU’s operating efficiency ratios such as ROA here.
Can IMMU meet its short-term obligations with the cash in hand?
With current liabilities at US$32m, it seems that the business has been able to meet these obligations given the level of current assets of US$505m, with a current ratio of 15.9x. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, a ratio greater than 3x may be considered high by some.
Does IMMU face the risk of succumbing to its debt-load?
With debt at 2.7% of equity, IMMU may be thought of as having low leverage. This range is considered safe as IMMU is not taking on too much debt obligation, which may be constraining for future growth. IMMU’s risk around capital structure is almost non-existent, and the company has the headroom and ability to raise debt should it need to in the future.
IMMU’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for IMMU’s financial health. Other important fundamentals need to be considered alongside. I recommend you 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.
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.