Mid-caps stocks, like Sangamo Therapeutics Inc (NASDAQ:SGMO) with a market capitalization of US$2.11B, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. Today we will look at SGMO’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 information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into SGMO here. Check out our latest analysis for Sangamo Therapeutics
Can SGMO service its debt comfortably?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For Sangamo Therapeutics, investors should not worry about its debt levels because the company has none! It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with SGMO, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can SGMO meet its short-term obligations with the cash in hand?
Since Sangamo Therapeutics doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at US$0, it seems that the business is not able to meet these obligations given the level of current assets of US$0, with a current ratio of 0x below the prudent level of 3x.
Next Steps:
SGMO has no debt as well as ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and shareholders, though, some degree of debt may also ramp up earnings growth and operational efficiency. Keep in mind I haven’t considered other factors such as how SGMO has performed in the past. I recommend you continue to research Sangamo Therapeutics to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for SGMO’s future growth? Take a look at our free research report of analyst consensus for SGMO’s outlook.
- 2. Valuation: What is SGMO 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 SGMO is currently mispriced by the market.
- 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.