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How Financially Strong Is Horizon Pharma Public Limited Company (HZNP)?

Stocks with market capitalization between $2B and $10B, such as Horizon Pharma Public Limited Company (NASDAQ:HZNP) with a size of USD $2.31B, do not attract as much attention from the investing community as do the small-caps and large-caps. 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 will take you through a few basic checks to assess the financial health of companies with no debt. View our latest analysis for Horizon Pharma

NasdaqGS:HZNP Historical Debt Nov 6th 17

Debt-to-equity ratio tells us how much of the asset debtors could claim if the company went out of business. For HZNP, the debt-to-equity ratio stands at above 100%, which indicates that the company is holding a high level of debt relative to its net worth. In the event of financial turmoil, the company may experience difficulty meeting interest and other debt obligations.

NasdaqGS:HZNP Net Worth Nov 6th 17

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. To assess this, I compare HZNP’s cash and other liquid assets against its upcoming debt. Our analysis shows that HZNP does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise.

Are you a shareholder? HZNP’s high debt levels are not met with high cash flow coverage. This means investors should ask themselves if they think HZNP can improve in terms of debt management and operational efficiency. Since HZNP’s financial situation may change, I recommend exploring market expectations for HZNP’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. HZNP’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.


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