Debt Cash – CTXETG http://ctxetg.com/ Fri, 14 Jan 2022 06:10:51 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://ctxetg.com/wp-content/uploads/2021/06/icon-150x150.png Debt Cash – CTXETG http://ctxetg.com/ 32 32 Here’s why Western India Plywoods (NSE: WIPL) has significant debt https://ctxetg.com/heres-why-western-india-plywoods-nse-wipl-has-significant-debt/ Fri, 14 Jan 2022 03:48:41 +0000 https://ctxetg.com/heres-why-western-india-plywoods-nse-wipl-has-significant-debt/ Legendary fund manager Li Lu (whom Charlie Munger once backed) once said, “The greatest risk in investing is not price volatility, but whether you will suffer a permanent loss of capital. When we think of a company’s risk, we always like to look at its use of debt, because over-indebtedness can lead to ruin. We […]]]>

Legendary fund manager Li Lu (whom Charlie Munger once backed) once said, “The greatest risk in investing is not price volatility, but whether you will suffer a permanent loss of capital. When we think of a company’s risk, we always like to look at its use of debt, because over-indebtedness can lead to ruin. We can see that The Western India Plywoods Limited (NSE: WIPL) uses debt in its operations. But the more important question is: what risk does this debt create?

Why is debt risky?

Generally speaking, debt only becomes a real problem when a company cannot easily repay it, either by raising capital or with its own cash flow. If things go really bad, lenders can take over the business. However, a more frequent (but still costly) event is when a company has to issue shares at bargain prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, especially capital-intensive businesses. When we think about a company’s use of debt, we first look at cash and debt together.

Check out our latest analysis for West India Plywoods

How much debt does Western India Plywoods have?

The graph below, which you can click on for more details, shows that Western India Plywoods had a debt of ₹180.3 million as of September 2021; about the same as the previous year. However, he has ₹24.3 million of cash to offset this, resulting in a net debt of around ₹156.0 million.

NSEI: WIPL’s Debt to Equity History January 14, 2022

How healthy is Western India Plywoods’ balance sheet?

Zooming in on the latest balance sheet data, we can see that Western India Plywoods had liabilities of ₹149.9 million due within 12 months and liabilities of ₹146.5 million due beyond. As compensation for these obligations, it had cash of ₹24.3 million as well as receivables valued at ₹193.4 million due within 12 months. Thus, its liabilities total £78.7 million more than the combination of its cash and short-term receivables.

Considering that Western India Plywoods has a market capitalization of ₹500.3 million, it is hard to believe that these liabilities pose a big threat. However, we think it’s worth keeping an eye on the strength of its balance sheet, as it can change over time.

We measure a company’s leverage against its earning power by looking at its net debt divided by its earnings before interest, taxes, depreciation and amortization (EBITDA) and calculating how easily its earnings before interest and taxes (EBIT ) covers its interest charge (interest coverage). Thus, we consider debt to earnings with and without amortization and depreciation expense.

While Western India Plywoods’ debt to EBITDA ratio (4.2) suggests it uses some debt, its interest coverage is very low at 0.65, suggesting high leverage. This is largely due to the company’s large amortization charges, which no doubt means that its EBITDA is a very generous measure of earnings, and that its debt may be heavier than it first appears. on board. It seems clear that the cost of borrowing money is having a negative impact on shareholder returns lately. Worse still, Western India Plywoods has seen its EBIT drop by 30% in the past 12 months. If profits continue like this in the long term, there is an unimaginable chance of repaying this debt. When analyzing debt levels, the balance sheet is the obvious starting point. But it is the profits of Western India Plywoods that will influence the balance sheet in the future. So, when considering debt, it is definitely worth looking at the earnings trend. Click here for an interactive preview.

Finally, a company can only repay its debts with cold hard cash, not with book profits. We must therefore clearly examine whether this EBIT generates a corresponding free cash flow. Over the past three years, Western India Plywoods has actually produced more free cash flow than EBIT. There’s nothing better than incoming money to stay in the good books of your lenders.

Our point of view

Neither Western India Plywoods’ ability to increase its EBIT nor its interest coverage gave us confidence in its ability to take on more debt. But the good news is that it seems to be able to easily convert EBIT to free cash flow. We think Western India Plywoods’ debt makes it a bit risky, after looking at the aforementioned data points together. Not all risk is bad, as it can increase stock price returns if it pays off, but this leverage risk is worth keeping in mind. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks reside on the balance sheet, far from it. Be aware that Western India Plywoods shows 4 warning signs in our investment analysis and 3 of them make us uncomfortable…

In the end, sometimes it’s easier to focus on companies that don’t even need to take on debt. Readers can access a list of growth stocks with no net debt 100% freeat present.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Prince Andrew settles £ 6.6million debt with French social worker after buying Swiss ski chalet https://ctxetg.com/prince-andrew-settles-6-6million-debt-with-french-social-worker-after-buying-swiss-ski-chalet/ Mon, 10 Jan 2022 08:57:47 +0000 https://ctxetg.com/prince-andrew-settles-6-6million-debt-with-french-social-worker-after-buying-swiss-ski-chalet/ Prince Andrew has settled a £ 6.6million debt with a French socialite paving the way for him to sell his beloved ski chalet to fund his alleged sexual abuse case. Isabelle de Rouvre, 74, sold her home, Chalet Helora, to then friends Prince Andrew and ex-wife Sarah Ferguson in 2014 for £ 18million. But they […]]]>

Prince Andrew has settled a £ 6.6million debt with a French socialite paving the way for him to sell his beloved ski chalet to fund his alleged sexual abuse case.

Isabelle de Rouvre, 74, sold her home, Chalet Helora, to then friends Prince Andrew and ex-wife Sarah Ferguson in 2014 for £ 18million.

But they failed to pay £ 5million in cash for the ownership of the exclusive Swiss ski resort of Verbier.

Ms de Rouvre agreed it could be postponed until December 2019, with accrued interest, but the couple have not honored the deal despite repeated requests.

Glamorous Mme de Rouvre, saddened by the breach of trust, was forced to launch a legal battle in Swiss courts two years ago in an attempt to recover the sum owed to him by the Duke of York.

The Duke finally paid at the end of last year, and Madame de Rouvre has now declared: “The war is over. He paid the money.

The settlement now paves the way for Andrew to sell Chalet Helora and free up the money he desperately needs to pay his growing legal bills due to allegations he sexually assaulted Virginia Roberts.

Andrew bought the seven-bedroom Helora chalet in the luxury Swiss resort of Verbier with his ex-wife Sarah Ferguson in 2014 for £ 16.6million

French socialite Isabelle de Rouvre (pictured) sued the prince and his ex-wife last year

In September last year, it was reported that Andrew and the Duchess of York were set to sell the chalet to settle a legal dispute with its former owner, Isabella de Rouvre, 74.

Ms de Rouvre said: “I sold it two months ago, or was it one. Maybe six weeks ago.

“Anyway, I sold it to the Yorks and we made a deal. Fortunately, this is the end of the story.

“The war is over. This is the end of the matter.

“I have nothing to do with it now. That’s all.

“I don’t know what they’re doing now. They were here at Christmas, but I only know because I read it in the press. I haven’t seen them. So merry Christmas and that’s it. The end.

“About six weeks ago, the case was closed. It was in November. It’s done. They paid the money and it was done. It’s closed for me. The war is over. He paid the money. We have a war against Covid which is bigger but it was a different war.

“The second payment had to be paid and that payment is now made. That’s it. You can be sure that’s it. It’s done.

Prince Andrew is pictured in 2001 with his ex-wife Sarah Ferguson and their children in Verbier, Switzerland

Prince Andrew is pictured in 2001 with his ex-wife Sarah Ferguson and their children in Verbier, Switzerland

Prince Andrew, Virginia Roberts, 17, and Ghislaine Maxwell at Ghislaine Maxwell's townhouse in London, Britain on March 13, 2001

Prince Andrew, Virginia Roberts, 17, and Ghislaine Maxwell at Ghislaine Maxwell’s townhouse in London, Britain on March 13, 2001

“If they live here, they live here. But I don’t know what they are doing.

A friend of the socialite said it had been an “extremely stressful” time for Ms. de Rouvre.

She said: “It has been extremely stressful for Isabelle. She sold the chalet in good faith. She thought they were friends. But everything went wrong. It has been overwhelming and stressful. She shouldn’t have been drawn into all of this. It’s a relief to her that the Yorks have now paid off and that she can sever ties.

The debt clearance means Andrew is now free to go ahead with plans to sell the property.

The Duke must find the funds to pay his team of American lawyers as they battle Ms Roberts’ claims.

Ms Roberts, who now uses her married name Giuffre, claims the prince had sex with her three times after being trafficked by pedophile Jeffrey Epstein. Prince Andrew has always denied the allegations.

The cession of the chalet will leave it without property in the UK or overseas.

Fergie and the couple’s daughters, Princesses Beatrice and Eugenie, were seen frolicking around Verbier just after Christmas, enjoying a ski vacation – possibly their last at Chalet Helora.

The chalet, which has seven bedrooms and an indoor swimming pool, holds special memories for the royal family.

Prince Andrew walks through Central Park in New York with Jeffrey Epstein after the latter's 2011 jail term

Prince Andrew walks through Central Park in New York with Jeffrey Epstein after the latter’s 2011 jail term

Ghislaine Maxwell gives Jeffrey Epstein a foot massage aboard his private jet dubbed the

Ghislaine Maxwell gives Jeffrey Epstein a foot massage aboard his private jet nicknamed the “Lolita Express”. The photo was entered into evidence in the Maxwell case on Dec. 7 by the US attorney’s office

As a family, the Yorks rented the Helora chalet from Mme de Rouvre for the winter holidays before deciding to buy it in 2014 as a nest egg for their daughters.

Andrew and Fergie jointly bought the property for around £ 18million.

They are said to have taken out a £ 13million mortgage with the remaining £ 5million to be paid in cash.

When this sum remained unpaid, the Yorks reportedly made an agreement with the socialite to defer payment until December 2019.

The pair were then to pay £ 6.6million, including the initial sum plus interest.

But despite repeated requests, the debt remained unpaid.

In May 2020, Mme de Rouvre was forced to sue the Duke. A long legal battle ensued.

Until the debt that hung over the cottage was paid, he was powerless to sell. It is believed that he has now found a buyer and the sale is in the process of being finalized.

Fergie and the Princesses were pictured at the resort last week with their families.

A neighbor said: “Maybe this was their last vacation here. To be fair, the neighborhood won’t be too sorry to see the backs of them. Once they arrive, all the paparazzi from Italy, France, Switzerland, etc.

“These are nuisances that block the roads and we often have to ask them to turn off their engines. They sit there with vapors going everywhere and polluting our beautiful mountain air.

“Plus, everything is pretty shabby with Andrew Bieng caught up in this sexual abuse scandal. This is not the image we want in Verbier.


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Can this REIT get out of debt before it’s too late? https://ctxetg.com/can-this-reit-get-out-of-debt-before-its-too-late/ Sat, 08 Jan 2022 16:35:00 +0000 https://ctxetg.com/can-this-reit-get-out-of-debt-before-its-too-late/ For several years, Seritage Growth Properties‘ (NYSE: SRG) The heavy indebtedness posed a significant risk to shareholders of the Sears spin-off company. When the COVID-19 pandemic struck in 2020, disrupting Seritage redevelopment plans, that risk suddenly became acute, threatening the future of the FPI. Last week, Seritage Growth Properties took an important step on the […]]]>

For several years, Seritage Growth Properties(NYSE: SRG) The heavy indebtedness posed a significant risk to shareholders of the Sears spin-off company. When the COVID-19 pandemic struck in 2020, disrupting Seritage redevelopment plans, that risk suddenly became acute, threatening the future of the FPI.

Last week, Seritage Growth Properties took an important step on the road to returning to financial health by prepaying $ 160 million in debt. Nonetheless, he still has a lot of work to do to turn around his balance sheet so that he can focus on executing his turnaround strategy.

Burn endless money in sight

Seritage has been spending money consistently since mid-2018, when lead tenant Sears Holdings began closing stores much faster than the REIT could redevelop for new tenants.

That said, before the pandemic, Seritage appeared to be on track to return to positive cash flow within a year or two due to a wave of planned tenant openings in redeveloped properties. Sadly, the pandemic has pushed some of Seritage’s tenants into bankruptcy and forced others to close stores or reverse their expansion plans. During this time, the REIT sold rent-generating properties to raise funds.

Image source: Seritage Growth Properties.

As a result, by the third quarter of 2021, Seritage’s annual in-place rent had fallen to $ 92 million, from $ 108 million at the end of 2019. This sent Adjusted Operating Funds (FFO) down even further. in negative territory, down from – $ 15 million in Q4 2019 to – $ 25 million in Q3 2021.

Worse yet, Seritage’s signed lease pipeline for future openings shrank 66% during that time to just $ 29 million in annual base rent: not enough to bring the REIT back to FFO balance.

Reduce your debt

High interest charges are one of the main obstacles to Seritage’s efforts to return to FFOs and positive cash flow. Interest expense in cash on its term loan facility has totaled $ 116 million annually for the past several years. For this alone, it is essential for Seritage to reduce its debt as quickly as possible.

In addition, Seritage’s $ 1.6 billion term loan matures in July 2023. At the end of November, the lender (a subsidiary of Berkshire Hathaway) has agreed to extend the deadline by two years, on condition that Seritage reduce the balance to $ 800 million by next July. This makes debt reduction even more urgent.

On the positive side, Seritage has identified around 70 properties that it intends to sell. As of September 30, 2021, it had $ 224.4 million in assets under contract to sell. On December 31, it used part of the proceeds from its asset sale to make a $ 160 million prepayment. This will reduce annual interest expense by $ 11 million.

A black and white photo of cars in the parking lot outside a Seritage shopping center.

Image source: Seritage Growth Properties.

How much money can Seritage raise?

Seritage appears to have completed a particularly large asset sale last quarter, selling a former Sears location in San Bruno, Calif. (Just outside of San Francisco) for around $ 128 million. The REIT still has other valuable sites in its divestiture portfolio, including properties in San Jose and Westminster, California.

That said, most of the real estate Seritage wants to offload isn’t worth much. For example, he recently sold an old Kmart in the suburbs of Tampa for $ 6 million. This property is much more representative of what Seritage is looking to sell than the San Bruno site.

Seritage can certainly raise enough cash through the sale of additional assets to pay for its planned near-term redevelopment expenses of around $ 250 million. It should also be able to cover its ongoing cash consumption, which remains around $ 100 million per year, excluding capital spending. But after covering those costs, there probably won’t be enough left to seriously reduce Seritage’s remaining term debt by $ 1.44 billion.

Seritage can hope to refinance some of its debt using its best properties as mortgage collateral. However, Berkshire Hathaway currently holds mortgages on all of the REIT’s assets. Unless Berkshire agrees to more lenient terms, Seritage would need to raise enough liquidity to fully repay the term loan in order to tap the commercial mortgage market.

In short, Seritage still does not have a clear path to reduce its debt to a reasonable level compared to its annual rental income. Meanwhile, the slowness of leasing over the past two years casts doubt on its ability to break even any time soon. All in all, investors may find much better opportunities elsewhere in the REIT industry.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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Will Shape Robotics (CPH: SHAPE) spend its money wisely? https://ctxetg.com/will-shape-robotics-cph-shape-spend-its-money-wisely/ Fri, 07 Jan 2022 05:53:55 +0000 https://ctxetg.com/will-shape-robotics-cph-shape-spend-its-money-wisely/ Just because a business isn’t making money doesn’t mean the stock will go down. For example, although the software as a service company Salesforce.com lost money for years as it increased its recurring revenue, if you had owned stocks since 2005, you would have done very well. That said, unprofitable businesses are risky because they […]]]>

Just because a business isn’t making money doesn’t mean the stock will go down. For example, although the software as a service company Salesforce.com lost money for years as it increased its recurring revenue, if you had owned stocks since 2005, you would have done very well. That said, unprofitable businesses are risky because they could potentially spend all of their money and end up in distress.

So should Shape robotics (CPH: SHAPE) Are shareholders worried about its consumption of cash? In this article, we define cash consumption as its annual (negative) free cash flow, that is, the amount that a company spends each year to finance its growth. We will start by comparing its cash consumption with its cash reserves in order to calculate its cash flow track.

See our latest review for Shape Robotics

When could Shape Robotics run out of money?

A cash flow trail is defined as the time it would take a business to run out of cash if it continued to spend at its current rate of cash consumption. As of September 2021, Shape Robotics had SEK 9.7 million in cash and had no debt. Importantly, his cash consumption was 16 million crowns in the past twelve months. This means that it had a cash flow trail of around 7 months in September 2021. This is a fairly short cash flow trail, indicating that the company needs to either reduce its annual cash flow consumption or replenish its cash flow. Pictured below, you can see how his cash holdings have changed over time.

CPSE: SHAPE Debt to Equity History January 7, 2022

How does Shape Robotics’ money consumption change over time?

In our opinion, Shape Robotics is not yet generating significant operating income, as it has only brought in 6.5 million crowns in the past twelve months. As a result, we believe it is a bit early to focus on revenue growth, so we’ll limit ourselves to looking at how cash consumption has changed over time. Over the past year, its cash consumption has actually increased by 8.2%, which suggests that management is increasing its investments in future growth, but not too quickly. This is not necessarily a bad thing, but investors should be aware that it will shorten the liquidity trail. Granted, we are a little cautious of Shape Robotics due to its lack of significant operating revenue. So we generally prefer stocks from this list of stocks that analysts expect to grow.

How easily can Shape Robotics raise funds?

As its cash consumption increases (albeit slightly), Shape Robotics shareholders should always be aware of the possibility that it will need more cash in the future. Businesses can raise capital through debt or equity. Typically, a company itself will sell new stocks to raise funds and drive growth. We can compare a company’s cash consumption to its market capitalization to get an idea of ​​how many new shares a company would need to issue to fund its one-year operations.

Since it has a market cap of 156 million crowns, Shape Robotics’ 16 million crowns cash consumption is equivalent to about 11% of its market value. As a result, we venture to think that the company could raise more cash for growth without too many problems, albeit at the cost of some dilution.

Is Shape Robotics’ money consumption a problem?

On this analysis of Shape Robotics’ cash consumption, we think its cash consumption relative to its market cap was reassuring, while its cash trail worries us a bit. Looking at the factors mentioned in this short report, we think its consumption of cash is a bit risky, and that makes us slightly nervous about the stock. Diving deeper, we spotted 6 warning signs for Shape Robotics you need to be aware, and 3 of them are potentially serious.

Sure Shape Robotics may not be the best stock to buy. So you might want to see this free a set of companies offering a high return on equity, or that list of stocks that insiders buy.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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Record-breaking pile of cash parked at Fed facility set to shrink https://ctxetg.com/record-breaking-pile-of-cash-parked-at-fed-facility-set-to-shrink/ Mon, 03 Jan 2022 05:00:49 +0000 https://ctxetg.com/record-breaking-pile-of-cash-parked-at-fed-facility-set-to-shrink/ Growing demand for a U.S. Federal Reserve facility, where investors store cash overnight, is expected to subside in 2022 after a record run last year, as the shortage of low-risk assets generating positive returns fades. Investors parked record sums in 2021 in the Fed’s overnight repo facility, where cash is exchanged for ultra-safe securities such […]]]>

Growing demand for a U.S. Federal Reserve facility, where investors store cash overnight, is expected to subside in 2022 after a record run last year, as the shortage of low-risk assets generating positive returns fades.

Investors parked record sums in 2021 in the Fed’s overnight repo facility, where cash is exchanged for ultra-safe securities such as US Treasuries. Daily use of the RRP averaged $ 1.6 billion in December, reaching a record high of $ 1.9 billion on the last day of the year. Average daily usage for December 2020 was zero.

The facility, which acts as an investment of last resort, has attracted such high demand throughout the year due to a shortage of safe, short-term Treasuries that has left investors such as money market funds less safe places to deploy their cash.

But in 2022, the popularity of the RRP will begin to wane, strategists say, as the flow of money injected into financial markets to counter the damaging effects of the pandemic begins to subside. This will provide more alternatives for investors and potentially increase the fortunes of distressed money market funds that invest in short-term assets.

“We think we’re pretty close to an overnight reverse repo peak,” said Mark Cabana, head of US rate strategy at Bank of America. “What this means for money market funds is that they finally have other interesting alternatives. The only reason silver funds invest with the Fed is because it’s their least worst option. “

Reductions in treasury bill issuance in 2021 – in favor of longer-term debt – were part of what drove the use of the RRP facility so high. Additionally, the Fed’s massive bond purchase program prompted the central bank to increase the amount of liquidity flowing into the financial system.

Demand for money market funds, which are among the biggest buyers of Treasuries, was so high that it briefly pushed government debt yields into negative territory.

Stimulus money tied to the multiple aid programs passed by Congress also raised Americans’ savings rates, which in turn increased bank deposits. Banks, which reimposed stricter capital requirements in March, began advising clients to move their money from deposits to money market funds.

But after new legislation was passed to lift the U.S. government’s borrowing limit in December, the Treasury Department is now expected to replenish its cash balance and step up short-term issuance, providing much-needed relief. .

By the end of January, Cabana said he expected the treasury’s cash balance to increase by about $ 600 billion.

The Fed also announced in December that it would accelerate the reduction of its asset purchase program, helping to further alleviate the acute mismatch between the amount of money looking for housing and the number of available securities. purchase.

While the RRP figures are mind-boggling, Fed officials have indicated little concern about the facility’s record usage in 2021. Asked about the seemingly insatiable demand to park money overnight at the central bank in July, President Jay Powell said the facility was doing “what it’s supposed to do.”

The minutes of subsequent political meetings also suggest a broad consensus within the Federal Free Market Committee that the facility was functioning as intended.

To maintain its effectiveness, the Fed has repeatedly changed the terms of the facility. The central bank increased the number of eligible counterparties that can access the RRP and increased the amount of money they can invest in it each day – an adjustment it made no later than September when it increased the daily counterparty limit of $ 160 billion.

He also started paying interest on money held overnight in June in an attempt to support the smooth functioning of short-term funding markets. This move was accompanied by a decision to increase the interest it pays on excess reserves, which are deposited with the Fed by the banks.

More recently, however, a senior Fed official cited the high use of the RRP as another signal that the central bank should move away more quickly from its ultra-accommodative monetary policy that has been in place since the start of the pandemic. .

“It’s pretty clear that we can go faster on the balance sheet, because I’ve looked at the RRP facility, and there’s about $ 1.5 billion in reserves being handed to us every day by the financial industry,” he said. Christopher Waller, a governor, said in mid-December, as he advocated for the Fed to start reducing its balance sheet by the summer. “We put so much cash in the system that the market doesn’t really want it.”

The benefits of an increase in bond issuance are expected to accrue the most to the $ 4 billion money market fund industry after a grueling year. Negative market returns in 2021 wiped out earnings and forced funds to turn away new investors.

However, tensions in the money market could reappear later in the year, warn some strategists. Although the Treasury will need to auction more short-term bills, debt issuance in 2022 is expected to decline overall, as funding requirements for budget programs have declined.

“Once the supply of bills increases more significantly, it will take money out of the RRP. But the sheer size of the Fed’s balance sheet and the level of reserves, I think, will ensure that we see some pretty big numbers there every day for at least the next few quarters, ”said Ben Jeffery, rate strategist at BMO Capital Markets. capital. .


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GameStop (NYSE: GME) has debt but no profit; Should we be worried? https://ctxetg.com/gamestop-nyse-gme-has-debt-but-no-profit-should-we-be-worried/ Sat, 01 Jan 2022 13:54:39 +0000 https://ctxetg.com/gamestop-nyse-gme-has-debt-but-no-profit-should-we-be-worried/ Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from risk.” It is only natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when a business collapses. We can see that […]]]>

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from risk.” It is only natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when a business collapses. We can see that GameStop Corp. (NYSE: GME) uses debt in its business. But the most important question is: what risk does this debt create?

When is Debt a Problem?

Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. In the worst case scenario, a business can go bankrupt if it cannot pay its creditors. While it’s not too common, we often see indebted companies continually diluting their shareholders because lenders are forcing them to raise capital at a ridiculous price. Of course, many companies use debt to finance their growth without negative consequences. When we look at debt levels, we first look at cash and debt levels, together.

See our latest review for GameStop

How much debt does GameStop have?

The image below, which you can click for more details, shows that GameStop was in debt of $ 46.2 million at the end of October 2021, a reduction from $ 485.5 million on a year. However, his balance sheet shows he has $ 1.41 billion in cash, so he actually has $ 1.37 billion in net cash.

NYSE Debt to Equity History: GME January 1, 2022

How healthy is GameStop’s track record?

We can see from the most recent balance sheet that GameStop had liabilities of US $ 1.53 billion due within one year and liabilities of US $ 473.8 million owed beyond that. In return, he had $ 1.41 billion in cash and $ 241.2 million in receivables due within 12 months. Its liabilities therefore total $ 352.9 million more than the combination of its cash and short-term receivables.

Considering GameStop has a massive market cap of $ 11.3 billion, it’s hard to believe that these liabilities pose a significant threat. However, we think it’s worth keeping an eye on the strength of its balance sheet as it can change over time. While it has some liabilities to note, GameStop also has more cash than debt, so we’re pretty confident it can handle its debt safely. When analyzing debt levels, the balance sheet is the obvious place to start. But it’s future profits, more than anything, that will determine GameStop’s ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free Analyst Profit Forecast report interesting.

Year over year, GameStop reported revenue of US $ 5.9 billion, a gain of 14%, although it reported no profit before interest and taxes. This growth rate is a bit slow for our tastes, but it takes all types to make a world.

So how risky is GameStop?

We are convinced that loss-making companies are, in general, riskier than profitable ones. And we note that GameStop has recorded a loss of earnings before interest and taxes (EBIT) over the past year. And during the same period, it recorded a negative free cash outflow of US $ 227 million and a book loss of US $ 154 million. With only $ 1.37 billion on the balance sheet, it looks like it will soon have to raise capital again. Overall, we would say the stock is a bit risky, and we’re generally very cautious until we see positive free cash flow. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks lie on the balance sheet – far from it. For example, we have identified 3 warning signs for GameStop that you need to be aware of.

If, after all of this, you’re more interested in a fast-growing company with a strong balance sheet, take a quick look at our list of cash-flow net-growth stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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Here’s why we’re not too worried about the silver-consuming situation at Argenica Therapeutics (ASX: AGN) https://ctxetg.com/heres-why-were-not-too-worried-about-the-silver-consuming-situation-at-argenica-therapeutics-asx-agn/ Thu, 30 Dec 2021 20:35:15 +0000 https://ctxetg.com/heres-why-were-not-too-worried-about-the-silver-consuming-situation-at-argenica-therapeutics-asx-agn/ Just because a business isn’t making money doesn’t mean the stock will go down. For example, although Amazon.com suffered losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while the successes are well known, investors should not ignore the myriad of […]]]>

Just because a business isn’t making money doesn’t mean the stock will go down. For example, although Amazon.com suffered losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while the successes are well known, investors should not ignore the myriad of unprofitable companies that simply burn all their money and collapse.

So the natural question for Argenica Therapeutics (ASX: AGN) is whether they should be concerned about its rate of cash consumption. For the purposes of this article, we’ll define cash consumption as the amount of cash the business spends each year to finance its growth (also known as negative free cash flow). First, we will determine its cash trail by comparing its cash consumption with its cash reserves.

See our latest review for Argenica Therapeutics

Does Argenica Therapeutics have a long cash flow trail?

You can calculate a company’s cash flow trail by dividing the amount of cash it has by the rate at which it spends that cash. As of June 2021, Argenica Therapeutics had A $ 7.1 million in cash and no debt. Looking at last year, the company spent A $ 1.0 million. So he had a cash flow trail of around 6.8 years from June 2021. While this is only a measure of his cash flow situation, it certainly gives us the impression that holders have nothing to fear. You can see how his cash balance has changed over time in the image below.

ASX: AGN Debt to equity history December 30, 2021

How does Argenica Therapeutics’ silver consumption change over time?

Although Argenica Therapeutics reported sales of AU $ 296,000 last year, it actually has no operating income. For us this makes it a pre-income business, so we will look at its cash consumption trajectory as an assessment of its cash consumption situation. Remarkably, it has actually increased its cash consumption by 938% over the past year. We certainly hope for the sake of shareholders that the money is well spent, because this kind of spending increase always makes us nervous. Admittedly, we are a little cautious of Argenica Therapeutics due to its lack of significant operating income. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How easily can Argenica Therapeutics raise funds?

Given its cash-consuming trajectory, Argenica Therapeutics shareholders might consider how easily it could raise more cash, despite its strong liquidity track. Businesses can raise capital through debt or equity. One of the main advantages of publicly traded companies is that they can sell stocks to investors to raise funds and finance their growth. We can compare a company’s cash consumption to its market capitalization to get an idea of ​​how many new shares a company would need to issue to fund its one-year operations.

Argenica Therapeutics’ cash consumption of AU $ 1.0 million represents approximately 1.8% of its market capitalization of AU $ 59 million. So he could almost certainly borrow a little to finance another year’s growth, or he could easily raise cash by issuing a few shares.

How risky is Argenica Therapeutics’ cash burn situation?

It may already be obvious to you that we are relatively comfortable with the way Argenica Therapeutics burns its money. In particular, we believe that its cash flow track stands out as proof that the company has good control over its spending. While we find its growing cash consumption to be a bit negative, once we consider the other metrics mentioned in this article together, the overall picture is one we’re comfortable with. Looking at all of the metrics in this article, together, we’re not worried about its rate of cash consumption; the business appears to be well above its medium-term spending needs. On another note, we conducted a thorough investigation of the company and identified 4 warning signs for Argenica Therapeutics (1 is a bit nasty!) Which you should be aware of before investing here.

If you’d rather discover another business with better fundamentals, don’t miss this free list of interesting companies that have HIGH ROE and low debt or this list of stocks that are all expected to grow.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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Is SoftwareONE Holding (VTX: SWON) using too much debt? https://ctxetg.com/is-softwareone-holding-vtx-swon-using-too-much-debt/ Wed, 29 Dec 2021 05:41:30 +0000 https://ctxetg.com/is-softwareone-holding-vtx-swon-using-too-much-debt/ Legendary fund manager Li Lu (whom Charlie Munger supported) once said, “The biggest risk in investing is not price volatility, but the possibility that you will suffer a permanent loss of capital.” So it can be obvious that you need to consider debt, when you think about how risky a given stock is because too […]]]>

Legendary fund manager Li Lu (whom Charlie Munger supported) once said, “The biggest risk in investing is not price volatility, but the possibility that you will suffer a permanent loss of capital.” So it can be obvious that you need to consider debt, when you think about how risky a given stock is because too much debt can sink a business. Like many other companies SoftwareONE Holding AG (VTX: SWON) uses debt. But the most important question is: what risk does this debt create?

Why Does Debt Bring Risk?

Debts and other liabilities become risky for a business when it cannot easily meet these obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a business can go bankrupt if it cannot pay its creditors. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. That said, the most common situation is where a business manages its debt reasonably well – and to its own advantage. When we think of a business’s use of debt, we first look at cash flow and debt together.

See our latest analysis for SoftwareONE Holding

What is SoftwareONE Holding’s net debt?

As you can see below, SoftwareONE Holding had a debt of CHF 4.31 million in June 2021, up from CHF 151.9 million a year earlier. But it also has 426.4 million Swiss francs in cash to compensate for this, which means it has 422.1 million Swiss francs in net cash.

SWX: SWON History of debt to equity December 29, 2021

A look at the responsibilities of SoftwareONE Holding

Zooming in on the latest balance sheet data, we can see that SoftwareONE Holding had a liability of CHF 2.32 billion due within 12 months and a liability of CHF 154.4 million due beyond. In compensation for these obligations, he had cash of CHF 426.4 million as well as receivables valued at CHF 2.03 billion within 12 months. Thus, its total liabilities correspond more or less perfectly to its short-term liquid assets.

This fact indicates that SoftwareONE Holding’s balance sheet looks quite strong, as its total liabilities roughly equal its liquid assets. So while it’s hard to imagine the CHF 3.06 billion company struggling to find cash, we still think it’s worth watching its balance sheet. While it has some liabilities to note, SoftwareONE Holding also has more cash than debt, so we’re pretty confident that it can handle its debt safely.

While SoftwareONE Holding doesn’t appear to have gained much on the EBIT line, at least earnings remain stable for now. When analyzing debt levels, the balance sheet is the obvious place to start. But it is future profits, more than anything, that will determine SoftwareONE Holding’s ability to maintain a healthy balance sheet going forward. So if you are focused on the future you can check this out free report showing analysts’ earnings forecasts.

Finally, while the IRS may love accounting profits, lenders only accept hard cash. SoftwareONE Holding may have net cash on the balance sheet, but it’s always interesting to see how well the business converts its earnings before interest and taxes (EBIT) into free cash flow, as this will influence both its need and capacity. to manage debt. Over the past three years, SoftwareONE Holding has actually generated more free cash flow than EBIT. This kind of solid silver generation warms our hearts like a puppy in a bumblebee costume.

In summary

We could understand if investors are concerned about SoftwareONE Holding’s liabilities, but we can be reassured that it has net cash of CHF 422.1 million. The icing on the cake is that he converted 119% of that EBIT into free cash flow, bringing in CHF 11 million. So is SoftwareONE Holding’s debt a risk? It does not seem to us. When analyzing debt levels, the balance sheet is the obvious place to start. However, not all investment risks lie on the balance sheet – far from it. For example, we have identified 2 warning signs for SoftwareONE Holding (1 is not doing too well with us) you should be aware of.

If, after all of this, you’re more interested in a fast-growing company with a strong balance sheet, take a quick look at our list of cash-flow-growing stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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Did CCR SA (BVMF: CCRO3) use the debt to deliver its 9.8% ROE? https://ctxetg.com/did-ccr-sa-bvmf-ccro3-use-the-debt-to-deliver-its-9-8-roe/ Mon, 27 Dec 2021 09:12:33 +0000 https://ctxetg.com/did-ccr-sa-bvmf-ccro3-use-the-debt-to-deliver-its-9-8-roe/ Many investors are still educating themselves about the various metrics that can be useful when analyzing a stock. This article is for those who want to learn more about return on equity (ROE). We will use ROE to examine CCR SA (BVMF: CCRO3), through a worked example. Return on equity or ROE is a key […]]]>

Many investors are still educating themselves about the various metrics that can be useful when analyzing a stock. This article is for those who want to learn more about return on equity (ROE). We will use ROE to examine CCR SA (BVMF: CCRO3), through a worked example.

Return on equity or ROE is a key metric used to assess the efficiency with which the management of a business is using business capital. In short, the ROE shows the profit that each dollar generates compared to the investments of its shareholders.

Check out our latest analysis for the CCR

How do you calculate return on equity?

the formula for ROE is:

Return on equity = Net income (from continuing operations) ÷ Equity

So, based on the above formula, the ROE for CCR is:

9.8% = 875 million reais ÷ 8.9 billion reais (based on the last twelve months up to September 2021).

The “return” is the annual profit. One way to conceptualize this is that for every R $ 1 of shareholder capital it has, the company has made R $ 0.10 in profit.

Does CCR have a good return on equity?

An easy way to determine if a company has a good return on equity is to compare it to the average in its industry. It is important to note that this measure is far from perfect, as companies differ considerably within a single industry classification. The image below shows that CCR has an ROE that is roughly in line with the infrastructure sector average (9.1%).

BOVESPA: CCRO3 Return on equity December 27, 2021

So even if the ROE is not exceptional, it is at least acceptable. Even though the ROE is respectable compared to the industry, it is worth checking out if the company’s ROE is helped by high debt levels. If this is true, it is more an indication of risk than potential.

What is the impact of debt on return on equity?

Most businesses need the money – somewhere – to increase their profits. This liquidity can come from retained earnings, the issuance of new shares (equity) or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the use of debt will improve returns, but will not affect equity. In this way, the use of debt will increase the ROE, even if the basic economy of the business remains the same.

CCR’s debt and its ROE of 9.8%

Note the strong recourse to debt by CCR, which earned it a debt / equity ratio of 2.79. The combination of a rather low ROE and a high recourse to debt is not particularly attractive. Debt comes with additional risk, so it’s only really worth it when a business is making decent returns from it.

Conclusion

Return on equity is useful for comparing the quality of different companies. A business that can earn a high return on equity without going into debt can be considered a high quality business. If two companies have roughly the same level of debt to equity and one has a higher ROE, I would generally prefer the one with a higher ROE.

But when a company is of high quality, the market often offers it up to a price that reflects that. It is important to take into account other factors, such as future profit growth and the amount of investment required for the future. So you might want to check out this FREE visualization of analyst forecasts for the business.

But beware : CCR may not be the best stock to buy. So take a look at this free list of interesting companies with high ROE and low debt.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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These 4 metrics indicate that MGP Ingredients (NASDAQ: MGPI) is using debt reasonably well https://ctxetg.com/these-4-metrics-indicate-that-mgp-ingredients-nasdaq-mgpi-is-using-debt-reasonably-well/ Sat, 25 Dec 2021 14:24:27 +0000 https://ctxetg.com/these-4-metrics-indicate-that-mgp-ingredients-nasdaq-mgpi-is-using-debt-reasonably-well/ Berkshire Hathaway’s Charlie Munger-backed external fund manager Li Lu is quick to say “The biggest risk in investing is not price volatility, but whether you will suffer a permanent loss. of capital “. It is only natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when […]]]>

Berkshire Hathaway’s Charlie Munger-backed external fund manager Li Lu is quick to say “The biggest risk in investing is not price volatility, but whether you will suffer a permanent loss. of capital “. It is only natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when a business collapses. We notice that Ingredients MGP, Inc. (NASDAQ: MGPI) has debt on its balance sheet. But should shareholders be concerned about its use of debt?

When is debt dangerous?

Debt helps a business until the business struggles to repay it, either with new capital or with free cash flow. In the worst case scenario, a business can go bankrupt if it cannot pay its creditors. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution in a business with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash flow and debt together.

See our latest review for MGP ingredients

What is MGP Ingredients’ net debt?

You can click on the graph below for historical figures, but it shows that as of September 2021, MGP Ingredients had a debt of US $ 247.7 million, an increase from US $ 54.5 million. , over one year. However, it has $ 16.2 million in cash offsetting that, leading to net debt of around $ 231.5 million.

NasdaqGS: MGPI History of debt to equity December 25, 2021

How strong is MGP Ingredients’ balance sheet?

We can see from the most recent balance sheet that MGP Ingredients had liabilities of US $ 86.5 million due within one year and liabilities of US $ 316.1 million due beyond. . On the other hand, it had US $ 16.2 million in cash and US $ 93.5 million in receivables due within one year. Its liabilities therefore total $ 292.9 million more than the combination of its cash and short-term receivables.

Considering that MGP Ingredients’ listed shares are worth a total of US $ 1.91 billion, it seems unlikely that this level of liabilities is a major threat. But there are enough liabilities that we would certainly recommend that shareholders continue to monitor the balance sheet going forward.

We use two main ratios to inform us about the levels of debt compared to earnings. The first is net debt divided by earnings before interest, taxes, depreciation, and amortization (EBITDA), while the second is the number of times its earnings before interest and taxes (EBIT) covers its interest expense (or its coverage of interest, for short). Thus, we look at debt versus earnings with and without amortization expenses.

MGP Ingredients’ net debt to EBITDA ratio of around 2.0 suggests moderate use of debt. And its strong coverage interest of 37.7 times, makes us even more comfortable. It should be noted that MGP Ingredients’ EBIT has jumped like bamboo after the rain, gaining 82% in the last twelve months. This will make it easier to manage your debt. When analyzing debt levels, the balance sheet is the obvious place to start. But ultimately, the company’s future profitability will decide whether MGP Ingredients can strengthen its balance sheet over time. So if you are focused on the future you can check this out free report showing analysts’ earnings forecasts.

But our last consideration is also important, because a business cannot pay its debts with paper profits; he needs hard cash. We therefore always check how much of this EBIT is converted into free cash flow. Over the past three years, MGP Ingredients’ free cash flow has been 44% of its EBIT, less than we expected. It’s not great when it comes to paying down debt.

Our point of view

MGP Ingredients’ interest coverage suggests he can manage his debt as easily as Cristiano Ronaldo could score a goal against an Under-14 keeper. And the good news doesn’t end there, as its EBIT growth rate also supports this impression! Considering all of this data, it seems to us that MGP Ingredients is taking a pretty sane approach to debt. This means that they are taking a bit more risk, in the hope of increasing shareholder returns. The balance sheet is clearly the area to focus on when analyzing debt. But at the end of the day, every business can contain risks that exist off the balance sheet. For example, we discovered 2 warning signs for MGP ingredients which you should know before investing here.

If you want to invest in companies that can generate profits without the burden of debt, check out this free list of growing companies that have net cash on the balance sheet.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.


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