Stocks with market capitalization between $2B and $10B, such as CRISPR Therapeutics AG (NASDAQ:CRSP) with a size of US$2.0b, do not attract as much attention from the investing community as do the small-caps and large-caps. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. CRSP’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 information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into CRSP here.
Is CRSP’s debt level acceptable?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For CRSP, 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 CRSP, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does CRSP’s liquid assets cover its short-term commitments?
Since CRISPR Therapeutics 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. With current liabilities at US$28m, the company has been able to meet these obligations given the level of current assets of US$466m, with a current ratio of 16.81x. Having said that, a ratio above 3x may be considered excessive by some investors.
CRSP has zero-debt as well as ample cash to cover its near-term liabilities. Its safe operations reduces risk for the company and its investors, 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 CRSP has company-specific issues impacting its capital structure decisions. You should continue to research CRISPR Therapeutics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CRSP’s future growth? Take a look at our free research report of analyst consensus for CRSP’s outlook.
- Historical Performance: What has CRSP’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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.