Mid-caps stocks, like Xencor Inc (NASDAQ:XNCR) 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. Surprisingly though, when accounted for risk, mid-caps have delivered better returns compared to the two other categories of stocks. This article will examine XNCR’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into XNCR here.
Can XNCR service its debt comfortably?
A debt-to-equity ratio threshold varies depending on what industry the company operates, since some requires more debt financing than others. As a rule of thumb, a financially healthy mid-cap should have a ratio less than 40%. For Xencor, investors should not worry about its debt levels because the company has none! 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 XNCR, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can XNCR pay its short-term liabilities?
Given zero long-term debt on its balance sheet, Xencor has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at US$52m, it seems that the business has been able to meet these commitments with a current assets level of US$287m, leading to a 5.51x current account ratio. However, a ratio above 3x may be considered excessive by some investors.
XNCR has zero-debt as well as ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and shareholders, though, some degree of debt may also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for XNCR’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Xencor to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XNCR’s future growth? Take a look at our free research report of analyst consensus for XNCR’s outlook.
- Historical Performance: What has XNCR’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 email@example.com.