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Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) with a market-capitalization of US$7.6b, rarely draw their attention. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. ALNY’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. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into ALNY here.
Does ALNY Produce Much Cash Relative To Its Debt?
Over the past year, ALNY has ramped up its debt from US$30m to US$329m – this includes long-term debt. With this rise in debt, ALNY currently has US$1.2b remaining in cash and short-term investments , ready to be used for running the business. Moving on, operating cash flow was negative over the last twelve months. 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 ALNY’s operating efficiency ratios such as ROA here.
Can ALNY meet its short-term obligations with the cash in hand?
Looking at ALNY’s US$149m in current liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 9.33x. The current ratio is the number you get when you divide current assets by current liabilities. Having said that, many consider a ratio above 3x to be high.
Does ALNY face the risk of succumbing to its debt-load?
With debt at 1.9% of equity, ALNY may be thought of as having low leverage. This range is considered safe as ALNY is not taking on too much debt obligation, which may be constraining for future growth. Risk around debt is extremely low for ALNY, and the company also has the ability and headroom to increase debt if needed going forward.
ALNY’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I'm sure ALNY has company-specific issues impacting its capital structure decisions. I recommend you continue to research Alnylam Pharmaceuticals to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ALNY’s future growth? Take a look at our free research report of analyst consensus for ALNY’s outlook.
- Valuation: What is ALNY 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 ALNY 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.