Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like Bio-Rad Laboratories Inc (NYSE:BIO), with a market cap of US$9.22b, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Today we will look at BIO’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 BIO here.
How much cash does BIO generate through its operations?
BIO has sustained its debt level by about US$440.5m over the last 12 months comprising of short- and long-term debt. At this constant level of debt, BIO’s cash and short-term investments stands at US$818.2m , ready to deploy into the business. Moreover, BIO has generated cash from operations of US$215.8m in the last twelve months, resulting in an operating cash to total debt ratio of 49.0%, indicating that BIO’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In BIO’s case, it is able to generate 0.49x cash from its debt capital.
Can BIO meet its short-term obligations with the cash in hand?
Looking at BIO’s most recent US$442.4m liabilities, it seems that the business has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 4.5x. However, anything above 3x is considered high and could mean that BIO has too much idle capital in low-earning investments.
Does BIO face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 9.5%, BIO’s debt level is relatively low. This range is considered safe as BIO is not taking on too much debt obligation, which can be restrictive and risky for equity-holders.
BIO 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 exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how BIO has been performing in the past. You should continue to research Bio-Rad Laboratories to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BIO’s future growth? Take a look at our free research report of analyst consensus for BIO’s outlook.
- Valuation: What is BIO 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 BIO 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.