Stocks with market capitalization between $2B and $10B, such as BTG plc (LON:BTG) with a size of UK£2.3b, do not attract as much attention from the investing community as do the small-caps and large-caps. 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. BTG’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. Don’t forget that this is a general and concentrated examination of BTG’s financial health, so you should conduct further analysis into BTG here.
Is BTG’s debt level acceptable?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For BTG, 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 BTG, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can BTG pay its short-term liabilities?
Given zero long-term debt on its balance sheet, BTG has no solvency issues, which is 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 UK£190m, the company has been able to meet these commitments with a current assets level of UK£408m, leading to a 2.15x current account ratio. For Pharmaceuticals companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
BTG has zero-debt as well as ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and its investors, however, some level of debt could also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for BTG’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research BTG to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BTG’s future growth? Take a look at our free research report of analyst consensus for BTG’s outlook.
- Valuation: What is BTG 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 BTG 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.