Has Axis AB (publ) (STO:AXIS) Got Enough Cash?
Stocks with market capitalization between $2B and $10B, such as Axis AB (publ) (OM:AXIS) with a size of KR23.27B, 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 AXIS’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into AXIS here. Check out our latest analysis for Axis
Does AXIS face the risk of succumbing to its debt-load?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. For AXIS, 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 AXIS, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can AXIS meet its short-term obligations with the cash in hand?
Since Axis 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. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of KR1.58B liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.19x. For Electronic companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
AXIS has no debt as well as ample cash to cover its near-term liabilities. Its safe operations reduces risk for the company and shareholders, but some degree of debt could also boost earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure AXIS has company-specific issues impacting its capital structure decisions. You should continue to research Axis to get a better picture of the stock by looking at:
Valuation: What is AXIS 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 AXIS is currently mispriced by the market.
Historical Performance: What has AXIS’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.
