Small-cap and large-cap companies receive a lot of attention from investors, but mid-cap stocks like WuXi Biologics (Cayman) Inc (HKG:2269), with a market cap of HK$68.5b, are often out of the spotlight. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups. This article will examine 2269’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. Don’t forget that this is a general and concentrated examination of WuXi Biologics (Cayman)’s financial health, so you should conduct further analysis into 2269 here.

See our latest analysis for WuXi Biologics (Cayman)

Can 2269 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. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. For 2269, the debt-to-equity ratio is zero, meaning that the company has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with 2269, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Does 2269’s liquid assets cover its short-term commitments?

Given zero long-term debt on its balance sheet, WuXi Biologics (Cayman) 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. At the current liabilities level of CN¥990m liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 5.89x. However, many consider anything above 3x to be quite high and could mean that 2269 has too much idle capital in low-earning investments.

Next Steps:

2269 has no debt as well as ample cash to cover its short-term commitments. Its safe operations reduces risk for the company and its investors, though, some degree of debt may also ramp up earnings growth and operational efficiency. I admit this is a fairly basic analysis for 2269’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research WuXi Biologics (Cayman) to get a better picture of the stock by looking at: