Mid-caps stocks, like Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) with a market capitalization of ₹322.08b, aren’t the focus of most investors who prefer to direct their investments towards either large-cap or small-cap stocks. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine PGHH’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 Procter & Gamble Hygiene and Health Care’s financial health, so you should conduct further analysis into PGHH here. Check out our latest analysis for Procter & Gamble Hygiene and Health Care

Does PGHH face the risk of succumbing to its debt-load?

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. Generally, mid-cap stocks are considered financially healthy if its ratio is below 40%. For PGHH, 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 PGHH, and the company has plenty of headroom and ability to raise debt should it need to in the future.

Can PGHH meet its short-term obligations with the cash in hand?

Since Procter & Gamble Hygiene and Health Care doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term 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. Looking at PGHH’s most recent ₹6.30b liabilities, it seems that the business is not able to meet these obligations given the level of current assets of ₹6.03b, with a current ratio of 0.96x below the prudent level of 3x.

Next Steps:

Although PGHH has no debt on its balance sheet, it still has short term liabilities such as salaries to pay. As an investor, you may want to figure out if there are company-specific reasons for not having any debt, especially when liquidity may also be an issue. Keep in mind I haven’t considered other factors such as how PGHH has been performing in the past. I suggest you continue to research Procter & Gamble Hygiene and Health Care to get a better picture of the mid-cap by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for PGHH’s future growth? Take a look at our free research report of analyst consensus for PGHH’s outlook.

2. Valuation: What is PGHH 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 PGHH is currently mispriced by the market.

3. 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 pass 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.