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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Rogers Corporation (NYSE:ROG), with a market capitalization of US$2.6b, rarely draw their attention from the investing community. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. Today we will look at ROG’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. Don’t forget that this is a general and concentrated examination of Rogers's financial health, so you should conduct further analysis into ROG here.
ROG’s Debt (And Cash Flows)
ROG has built up its total debt levels in the last twelve months, from US$137m to US$235m , which includes long-term debt. With this increase in debt, ROG currently has US$162m remaining in cash and short-term investments to keep the business going. Moreover, ROG has produced US$75m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 32%, indicating that ROG’s debt is appropriately covered by operating cash.
Can ROG pay its short-term liabilities?
With current liabilities at US$108m, it appears that the company has been able to meet these commitments with a current assets level of US$504m, leading to a 4.65x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. However, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.
Is ROG’s debt level acceptable?
ROG’s level of debt is appropriate relative to its total equity, at 27%. ROG is not taking on too much debt commitment, which may be constraining for future growth. We can check to see whether ROG is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In ROG's, case, the ratio of 17.82x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
ROG’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, 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 ROG has been performing in the past. I suggest you continue to research Rogers to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ROG’s future growth? Take a look at our free research report of analyst consensus for ROG’s outlook.
- Valuation: What is ROG 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 ROG 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.