Yahoo Finance Is Bayer Aktiengesellschaft’s (FRA:BAYN) Balance Sheet Strong Enough To Weather A Storm?
Investors pursuing a solid, dependable stock investment can often be led to Bayer Aktiengesellschaft (FRA:BAYN), a large-cap worth €85.95b. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. But, its financial health remains the key to continued success. I will provide an overview of Bayer’s financial liquidity and leverage to give you an idea of Bayer’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this commentary is very high-level and solely focused on financial health, so I suggest you dig deeper yourself into BAYN here. See our latest analysis for Bayer
How much cash does BAYN generate through its operations?
BAYN has shrunken its total debt levels in the last twelve months, from €19.58b to €14.42b , which is made up of current and long term debt. With this debt repayment, BAYN’s cash and short-term investments stands at €9.10b for investing into the business. Additionally, BAYN has produced cash from operations of €8.13b over the same time period, leading to an operating cash to total debt ratio of 56.42%, signalling that BAYN’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In BAYN’s case, it is able to generate 0.56x cash from its debt capital.
Can BAYN meet its short-term obligations with the cash in hand?
At the current liabilities level of €13.59b liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.21x. For Pharmaceuticals companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Can BAYN service its debt comfortably?
With a debt-to-equity ratio of 36.56%, BAYN’s debt level may be seen as prudent. BAYN is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. We can test if BAYN’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For BAYN, the ratio of 44.09x suggests that interest is comfortably covered. Large-cap investments like BAYN are often believed to be a safe investment due to their ability to pump out ample earnings multiple times its interest payments.
Next Steps:
BAYN’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. I admit this is a fairly basic analysis for BAYN’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research Bayer to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BAYN’s future growth? Take a look at our free research report of analyst consensus for BAYN’s outlook.
Valuation: What is BAYN 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 BAYN is currently mispriced by the market.
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.
