Why Moneysupermarketcom Group PLC (LON:MONY) Is A Financially Healthy Company
Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Moneysupermarketcom Group PLC (LON:MONY), with a market capitalization of UK£1.7b, rarely draw their attention from the investing community. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. Today we will look at MONY’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 information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into MONY here.
See our latest analysis for Moneysupermarket.com Group
Can MONY service its debt comfortably?
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. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For MONY, 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 MONY, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can MONY pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Moneysupermarket.com Group has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at UK£60m, the company has been able to meet these commitments with a current assets level of UK£80m, leading to a 1.33x current account ratio. For Online Retail companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
MONY has zero-debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, however, some level of debt could also ramp up earnings growth and operational efficiency. Keep in mind I haven’t considered other factors such as how MONY has performed in the past. I suggest you continue to research Moneysupermarket.com Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MONY’s future growth? Take a look at our free research report of analyst consensus for MONY’s outlook.
Valuation: What is MONY 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 MONY 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 editorial-team@simplywallst.com.
