Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Ryman Healthcare Limited (NZSE:RYM), with a market capitalization of NZ$5.27B, rarely draw their attention from the investing community. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. RYM’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. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into RYM here. Check out our latest analysis for Ryman Healthcare

Does RYM generate enough cash through operations?

Over the past year, RYM has ramped up its debt from NZ$555.16M to NZ$845.01M – this includes both the current and long-term debt. With this rise in debt, RYM’s cash and short-term investments stands at NZ$0 for investing into the business. Additionally, RYM has produced NZ$322.80M in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 38.20%, meaning that RYM’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In RYM’s case, it is able to generate 0.38x cash from its debt capital.

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

With current liabilities at NZ$375.14M, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.7x, which is below the prudent industry ratio of 3x.

Can RYM service its debt comfortably?

With a debt-to-equity ratio of 52.79%, RYM can be considered as an above-average leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In RYM’s case, the ratio of 3.77x suggests that interest is appropriately covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

Although RYM’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet debt obligations which means its debt is being efficiently utilised. However, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for RYM’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Ryman Healthcare to get a better picture of the stock by looking at: