Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Mid-caps stocks, like Mirati Therapeutics, Inc. (NASDAQ:MRTX) with a market capitalization of US$3.4b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine MRTX’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. Don’t forget that this is a general and concentrated examination of Mirati Therapeutics's financial health, so you should conduct further analysis into MRTX here.
Does MRTX face the risk of succumbing to its debt-load?
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. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. For MRTX, the debt-to-equity ratio is zero, meaning that the company has no debt. This means it has been running its business utilising funding from only its equity capital, which is rather impressive. Investors' risk associated with debt is virtually non-existent with MRTX, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can MRTX meet its short-term obligations with the cash in hand?
Given zero long-term debt on its balance sheet, Mirati Therapeutics 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. At the current liabilities level of US$25m, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 12.2x. The current ratio is calculated by dividing current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors.
MRTX 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, but some level of debt may also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for MRTX's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Mirati Therapeutics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MRTX’s future growth? Take a look at our free research report of analyst consensus for MRTX’s outlook.
- Valuation: What is MRTX 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 MRTX 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.