Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Syneos Health Inc (NASDAQ:SYNH), with a market cap of US$5.2b, are often out of the spotlight. 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. SYNH’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. 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?
SYNH’s debt levels have fallen from US$3.1b to US$2.9b over the last 12 months , which is made up of current and long term debt. With this reduction in debt, the current cash and short-term investment levels stands at US$134m , ready to deploy into the business. Additionally, SYNH has generated cash from operations of US$280m in the last twelve months, resulting in an operating cash to total debt ratio of 9.7%, meaning that SYNH’s debt is not appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency for unprofitable businesses as traditional 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?
At the current liabilities level of US$1.4b liabilities, it seems that the business may not be able to easily meet these obligations given the level of current assets of US$1.4b, with a current ratio of 0.97x.
Can SYNH service its debt comfortably?
Since total debt levels have outpaced equities, SYNH is a highly leveraged 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 presently loss-making, there’s a question of sustainability of its current operations. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
With a high level of debt on its balance sheet, SYNH could still be in a financially strong position if its cash flow also stacked up. However, this isn’t the case, and there’s room for SYNH to increase its operational efficiency. In addition to this, its lack of liquidity raises questions over current asset management practices for the mid-cap. Keep in mind I haven’t considered other factors such as how SYNH has been performing in the past. I recommend you 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.