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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as The Madison Square Garden Company (NYSE:MSG), with a market capitalization of US$7.4b, rarely draw their attention from the investing community. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. Today we will look at MSG’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into MSG here.
Does MSG Produce Much Cash Relative To Its Debt?
Over the past year, MSG has maintained its debt levels at around US$103m including long-term debt. At this constant level of debt, MSG's cash and short-term investments stands at US$1.2b , ready to be used for running the business. On top of this, MSG has generated US$197m in operating cash flow during the same period of time, leading to an operating cash to total debt ratio of 191%, indicating that MSG’s current level of operating cash is high enough to cover debt.
Can MSG meet its short-term obligations with the cash in hand?
Looking at MSG’s US$728m in current liabilities, the company has been able to meet these obligations given the level of current assets of US$1.5b, with a current ratio of 2.08x. The current ratio is the number you get when you divide current assets by current liabilities. For Entertainment companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can MSG service its debt comfortably?
With debt at 3.8% of equity, MSG may be thought of as having low leverage. MSG is not taking on too much debt commitment, which may be constraining for future growth.
MSG has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for MSG's financial health. Other important fundamentals need to be considered alongside. You should continue to research Madison Square Garden to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MSG’s future growth? Take a look at our free research report of analyst consensus for MSG’s outlook.
- Valuation: What is MSG 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 MSG 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 firstname.lastname@example.org. 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.