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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as LiveRamp Holdings, Inc. (NYSE:RAMP), with a market capitalization of US$3.3b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine RAMP’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 RAMP here.
Does RAMP 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%. The good news for investors is that LiveRamp Holdings 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 RAMP, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can RAMP meet its short-term obligations with the cash in hand?
Since LiveRamp Holdings 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$95m, it appears that the company has been able to meet these obligations given the level of current assets of US$1.2b, with a current ratio of 12.53x. The current ratio is calculated by dividing current assets by current liabilities. However, a ratio greater than 3x may be considered high by some.
RAMP has zero-debt in addition to ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and shareholders, but some degree of debt may also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I'm sure RAMP has company-specific issues impacting its capital structure decisions. You should continue to research LiveRamp Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RAMP’s future growth? Take a look at our free research report of analyst consensus for RAMP’s outlook.
- Valuation: What is RAMP 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 RAMP 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.