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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Syneos Health, Inc. (NASDAQ:SYNH) with a market-capitalization of US$5.4b, rarely draw their attention. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. Let’s take a look at SYNH’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into SYNH here.
How much cash does SYNH generate through its operations?
Over the past year, SYNH has reduced its debt from US$3.1b to US$2.9b , which includes long-term debt. With this debt payback, SYNH currently has US$134m remaining in cash and short-term investments for investing into the business. On top of this, SYNH has produced cash from operations of US$280m over the same time period, resulting in an operating cash to total debt ratio of 9.7%, indicating that SYNH’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency for loss making companies since metrics such as return on asset (ROA) requires a positive net income. In SYNH’s case, it is able to generate 0.097x cash from its debt capital.
Does SYNH’s liquid assets cover its short-term commitments?
With current liabilities at US$1.4b, it appears that the company arguably has a rather low level of current assets relative its obligations, with the current ratio last standing at 0.97x.
Can SYNH service its debt comfortably?
With total debt exceeding equities, SYNH is considered a highly levered company. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since SYNH is currently unprofitable, sustainability of its current state of operations becomes a concern. Maintaining a high level of debt, while revenues are still below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.
SYNH’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its lack of liquidity raises questions over current asset management practices for the mid-cap. I admit this is a fairly basic analysis for SYNH’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Syneos Health to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SYNH’s future growth? Take a look at our free research report of analyst consensus for SYNH’s outlook.
- Valuation: What is SYNH 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 SYNH 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.