Yahoo Finance Why Cranswick plc (LON:CWK) Is A Financially Healthy Company
Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Cranswick plc (LON:CWK), with a market cap of UK£1.74b, often get neglected by retail 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. Let’s take a look at CWK’s debt concentration and assess their financial liquidity to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into CWK here.
View our latest analysis for Cranswick
Is CWK’s debt level acceptable?
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. A ratio below 40% for mid-cap stocks is considered as financially healthy, as a rule of thumb. For CWK, the debt-to-equity ratio is zero, meaning that the company has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with CWK, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Does CWK’s liquid assets cover its short-term commitments?
Given zero long-term debt on its balance sheet, Cranswick has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. With current liabilities at UK£159.1m, it appears that the company has been able to meet these obligations given the level of current assets of UK£257.0m, with a current ratio of 1.62x. For Food companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Next Steps:
CWK has zero-debt in addition to ample cash to cover its near-term liabilities. Its safe operations reduces risk for the company and its investors, however, some degree of debt could also ramp up earnings growth and operational efficiency. This is only a rough assessment of financial health, and I’m sure CWK has company-specific issues impacting its capital structure decisions. I suggest you continue to research Cranswick to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CWK’s future growth? Take a look at our free research report of analyst consensus for CWK’s outlook.
Valuation: What is CWK 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 CWK 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
