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Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as PageGroup plc (LON:PAGE), with a market capitalization of UK£1.76b, rarely draw their attention from the investing community. However, history shows that overlooked mid-cap companies have performed better on a risk-adjusted manner than the smaller and larger segment of the market. This article will examine PAGE’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. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into PAGE here.
See our latest analysis for PageGroup
Does PAGE 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 PAGE, 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 PAGE, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does PAGE’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, PageGroup has no solvency issues, which is 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. At the current liabilities level of UK£209.3m liabilities, it appears that the company has been able to meet these commitments with a current assets level of UK£437.7m, leading to a 2.09x current account ratio. Generally, for Professional Services companies, this is a reasonable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
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PAGE has no debt as well as ample cash to cover its short-term liabilities. 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 PAGE’s financial health. Other important fundamentals need to be considered alongside. You should continue to research PageGroup to get a better picture of the stock by looking at: