Is ICU Medical Inc’s (NASDAQ:ICUI) Liquidity Good Enough?
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as ICU Medical Inc (NASDAQ:ICUI), with a market cap of US$5.54B, often get neglected by retail investors. 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. This article will examine ICUI’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 ICUI here. View our latest analysis for ICU Medical
Is ICUI’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. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For ICUI, 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 ICUI, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can ICUI pay its short-term liabilities?
Given zero long-term debt on its balance sheet, ICU Medical has no solvency issues, which is 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. With current liabilities at US$210.29M, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 4.11x. However, anything above 3x is considered high and could mean that ICUI has too much idle capital in low-earning investments.
Next Steps:
ICUI has zero-debt in addition to ample cash to cover its near-term commitments. Its safe operations reduces risk for the company and shareholders, however, some degree of debt may also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for ICUI’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research ICU Medical to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ICUI’s future growth? Take a look at our free research report of analyst consensus for ICUI’s outlook.
Valuation: What is ICUI 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 ICUI 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 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.
