Stocks with market capitalization between $2B and $10B, such as argenx SE (ENXTBR:ARGX) with a size of €2.73B, do not attract as much attention from the investing community as do the small-caps and large-caps. 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. This article will examine ARGX’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into ARGX here. Check out our latest analysis for argenx
Does ARGX face the risk of succumbing to its debt-load?
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. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For ARGX, the debt-to-equity ratio is zero, meaning that the company has no debt. 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 ARGX, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can ARGX meet its short-term obligations with the cash in hand?
Since argenx 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. Looking at ARGX’s most recent €25.95M liabilities, it appears that the company has been able to meet these commitments with a current assets level of €366.80M, leading to a 14.13x current account ratio. However, anything above 3x is considered high and could mean that ARGX has too much idle capital in low-earning investments.
ARGX has no debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, though, some degree of debt could also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure ARGX has company-specific issues impacting its capital structure decisions. I suggest you continue to research argenx to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ARGX’s future growth? Take a look at our free research report of analyst consensus for ARGX’s outlook.
Historical Performance: What has ARGX’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.
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 pass 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.