What does Insmed Incorporated's (NASDAQ:INSM) Balance Sheet Tell Us About Its Future?

Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Insmed Incorporated (NASDAQ:INSM), with a market cap of US$2.14B, often get neglected by retail investors. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. INSM’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into INSM here. View our latest analysis for Insmed

Does INSM generate enough cash through operations?

INSM's debt level has been constant at around US$55.57M over the previous year comprising of short- and long-term debt. At this stable level of debt, INSM currently has US$381.17M 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 take a look at some of INSM’s operating efficiency ratios such as ROA here.

Can INSM pay its short-term liabilities?

With current liabilities at US$44.66M, it appears that the company has been able to meet these obligations given the level of current assets of US$389.44M, with a current ratio of 8.72x. However, anything about 3x may be excessive, since INSM may be leaving too much capital in low-earning investments.

Can INSM service its debt comfortably?

INSM is a relatively highly levered company with a debt-to-equity of 69.61%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. But since INSM is presently loss-making, 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.

Next Steps:

INSM’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. Keep in mind I haven't considered other factors such as how INSM has been performing in the past. I recommend you continue to research Insmed to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for INSM’s future growth? Take a look at our free research report of analyst consensus for INSM’s outlook.
2. Historical Performance: What has INSM'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.
3. 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.