Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Aerie Pharmaceuticals Inc (NASDAQ:AERI) with a market-capitalization of $2.14B, rarely draw their attention and few analysts cover them. However, generally ignored mid-caps have historically delivered better risk adjusted returns than both of those groups, primarily due to seasoned executives running a lean corporate structure. I recommend you look at the following hurdles to assess AERI’s financial health. Check out our latest analysis for Aerie Pharmaceuticals
Can AERI service its debt comfortably?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. AERI’s debt-to-equity ratio stands at 77.71%, which means, while the company’s debt could pose a problem for its earnings stability, it is not at an alarmingly high level yet.
Does AERI’s liquid assets cover its short-term commitments?
Debt to equity ratio is an important aspect of financial strength. But if the company has a substantial amount of cash on its balance sheet, that should allay some fear of a debt overhang and increase the chance of meeting upcoming liabilities. In order to measure liquidity, we must compare AERI’s current assets with its upcoming liabilities. Our analysis shows that AERI is able to meet its upcoming commitments with its cash and other short-term assets, which lessens our concerns for the company’s business operations should any unfavourable circumstances arise.
Next Steps:
Are you a shareholder? AERI’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Since AERI’s capital structure could change, You should continue assessing market expectations for AERI’s future growth on our free analysis platform.
Are you a potential investor? Although investors should analyse the serviceability of debt, it shouldn’t be viewed in isolation of other factors. Ultimately, debt financing is an important source of funding for companies seeking to grow through new projects and investments. AERI’s Return on Capital Employed (ROCE) in order to see management’s track record at deploying funds in high-returning projects.
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.