Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Canopy Growth Corporation (NYSE:CGC), with a market cap of US$5.59B, often get neglected by retail investors. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. CGC’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 Amazon’s financial health, so you should conduct further analysis into CGC here. View our latest analysis for Canopy Growth
Does CGC generate enough cash through operations?
CGC has built up its total debt levels in the last twelve months, from CA$4.02M to CA$10.33M , which comprises of short- and long-term debt. With this growth in debt, CGC currently has CA$101.80M remaining in cash and short-term investments for investing into the business. Moving onto cash from operations, its trivial cash flows from operations make the cash-to-debt ratio less useful to us, though these low levels of cash means that operational efficiency is worth a look. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of CGC’s operating efficiency ratios such as ROA here.
Can CGC pay its short-term liabilities?
Looking at CGC’s most recent CA$17.67M liabilities, the company has been able to meet these commitments with a current assets level of CA$178.79M, leading to a 10.12x current account ratio. However, anything above 3x is considered high and could mean that CGC has too much idle capital in low-earning investments.
Does CGC face the risk of succumbing to its debt-load?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. The good news for investors is that Canopy Growth has virtually no debt. This means it has been running its business utilising funding from primarily its equity capital, which is rather impressive. Investors’ risk associated with debt is virtually non-existent with CGC, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Although CGC’s debt level is relatively low, its cash flow levels still could not copiously cover its borrowings. This may indicate room for improvement in terms of its operating efficiency. However, 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 CGC’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Canopy Growth to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CGC’s future growth? Take a look at our free research report of analyst consensus for CGC’s outlook.
- Valuation: What is CGC 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 CGC 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 pass 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.