Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Bruker Corporation (NASDAQ:BRKR) with a market-capitalization of US$6.2b, rarely draw their attention. 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. BRKR’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into BRKR here.
Does BRKR Produce Much Cash Relative To Its Debt?
Over the past year, BRKR has reduced its debt from US$416m to US$341m , which includes long-term debt. With this debt payback, BRKR currently has US$322m remaining in cash and short-term investments to keep the business going. Moreover, BRKR has generated cash from operations of US$240m in the last twelve months, resulting in an operating cash to total debt ratio of 70%, signalling that BRKR’s current level of operating cash is high enough to cover debt.
Can BRKR pay its short-term liabilities?
Looking at BRKR’s US$599m in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.18x. The current ratio is the number you get when you divide current assets by current liabilities. For Life Sciences companies, this ratio is within a sensible range as there's enough of a cash buffer without holding too much capital in low return investments.
Does BRKR face the risk of succumbing to its debt-load?
With debt at 37% of equity, BRKR may be thought of as appropriately levered. BRKR is not taking on too much debt commitment, which may be constraining for future growth. We can test if BRKR’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For BRKR, the ratio of 23.85x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as BRKR’s high interest coverage is seen as responsible and safe practice.
BRKR’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven't considered other factors such as how BRKR has been performing in the past. I suggest you continue to research Bruker to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BRKR’s future growth? Take a look at our free research report of analyst consensus for BRKR’s outlook.
- Valuation: What is BRKR 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 BRKR 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.
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