Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Himax Technologies Inc (NASDAQ:HIMX) with a market capitalization of $2.29B, rarely draw their attention from analysts and investors. While they are less talked about as an investment category, mid-cap risk-adjusted returns have generally been better than more commonly focused stocks that fall into the small- or large-cap categories. I’ve put together a small checklist, which I believe provides a ballpark estimate of their financial health status. View our latest analysis for Himax Technologies
Does HIMX face the risk of succumbing to its debt-load?
Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. For HIMX, the debt-to-equity ratio is 33.78%, which indicates that its debt is at an acceptable level.
Does HIMX’s liquid assets cover its short-term commitments?
Another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. If an adverse event occurs, the company may be forced to pay these immediate expenses with its liquid assets. In order to measure liquidity, we must compare HIMX’s current assets with its upcoming liabilities. Our analysis shows that HIMX 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? HIMX’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Given that HIMX’s financial position may differ over time, I encourage assessing market expectations for HIMX’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. HIMX’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.