Mid-caps stocks, like Myriad Genetics, Inc. (NASDAQ:MYGN) with a market capitalization of US$2.4b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. Today we will look at MYGN’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 MYGN here.
MYGN’s Debt (And Cash Flows)
MYGN has built up its total debt levels in the last twelve months, from US$43m to US$273m , which includes long-term debt. With this growth in debt, the current cash and short-term investment levels stands at US$165m , ready to be used for running the business. On top of this, MYGN has produced cash from operations of US$105m in the last twelve months, resulting in an operating cash to total debt ratio of 38%, meaning that MYGN’s current level of operating cash is high enough to cover debt.
Can MYGN pay its short-term liabilities?
With current liabilities at US$113m, the company has been able to meet these commitments with a current assets level of US$337m, leading to a 2.97x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Biotechs companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Does MYGN face the risk of succumbing to its debt-load?
With debt at 26% of equity, MYGN may be thought of as appropriately levered. MYGN is not taking on too much debt commitment, which may be constraining for future growth. We can test if MYGN’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For MYGN, the ratio of 10.78x suggests that interest is comfortably covered, which means that lenders may be less hesitant to lend out more funding as MYGN’s high interest coverage is seen as responsible and safe practice.
MYGN has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven't considered other factors such as how MYGN has been performing in the past. You should continue to research Myriad Genetics to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MYGN’s future growth? Take a look at our free research report of analyst consensus for MYGN’s outlook.
- Valuation: What is MYGN 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 MYGN 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.