The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Clean Harbors, Inc. (NYSE:CLH) does use debt in its business. But the more important question is: how much risk is that debt creating?
When Is Debt Dangerous?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.
View our latest analysis for Clean Harbors
How Much Debt Does Clean Harbors Carry?
You can click the graphic below for the historical numbers, but it shows that as of June 2022 Clean Harbors had US$2.53b of debt, an increase on US$1.58b, over one year. However, it also had US$415.4m in cash, and so its net debt is US$2.11b.
NYSE:CLH Debt to Equity History September 8th 2022
How Healthy Is Clean Harbors' Balance Sheet?
We can see from the most recent balance sheet that Clean Harbors had liabilities of US$990.1m falling due within a year, and liabilities of US$3.22b due beyond that. On the other hand, it had cash of US$415.4m and US$1.14b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$2.65b.
Clean Harbors has a market capitalization of US$6.47b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
Clean Harbors has a debt to EBITDA ratio of 2.7 and its EBIT covered its interest expense 5.0 times. This suggests that while the debt levels are significant, we'd stop short of calling them problematic. Importantly, Clean Harbors grew its EBIT by 62% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Clean Harbors can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Over the most recent three years, Clean Harbors recorded free cash flow worth 71% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Our View
Clean Harbors's EBIT growth rate suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14's goalkeeper. But, on a more sombre note, we are a little concerned by its net debt to EBITDA. All these things considered, it appears that Clean Harbors can comfortably handle its current debt levels. Of course, while this leverage can enhance returns on equity, it does bring more risk, so it's worth keeping an eye on this one. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Clean Harbors has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
伯克希尔哈撒韦的外部基金经理理想汽车·卢直言不讳地说,最大的投资风险不是价格的波动,而是你是否会遭受永久性的资本损失。当你考察一家公司的风险有多大时,考虑它的资产负债表是很自然的,因为当一家企业倒闭时,债务往往会涉及到它。我们可以看到清洁港湾公司(纽约证券交易所股票代码:CLH)确实在其业务中使用债务。但更重要的问题是:这笔债务造成了多大的风险?
债务在什么时候是危险的?
一般来说,只有当一家公司无法轻松偿还债务时,债务才会成为一个真正的问题,无论是通过筹集资金还是用自己的现金流。资本主义的一部分是“创造性破坏”的过程,破产的企业被银行家无情地清算。然而,一种更常见(但仍然昂贵)的情况是,一家公司必须以低廉的股价稀释股东的股份,才能控制债务。当然,在企业中,债务可以是一个重要的工具,特别是资本密集型企业。当我们检查债务水平时,我们首先同时考虑现金和债务水平。
查看我们对清洁港口的最新分析
清洁港口公司背负着多少债务?
你可以点击下图查看历史数据,但它显示,截至2022年6月,Clean Harbors的债务为25.3亿美元,比一年前增加了15.8亿美元。然而,它也有4.154亿美元的现金,因此其净债务为21.1亿美元。
纽约证券交易所:CLH债转股历史2022年9月8日
Clean Harbors的资产负债表有多健康?
我们可以从最近的资产负债表中看到,Clean Harbors有9.901亿美元的债务在一年内到期,超过一年的债务有32.2亿美元到期。另一方面,它有4.154亿美元的现金和11.4亿美元的应收账款在一年内到期。因此,它的负债比现金和(近期)应收账款之和高出26.5亿美元。
Clean Harbors的市值为64.7亿美元,因此如果有需要,它很可能会筹集现金来改善其资产负债表。但我们肯定希望密切关注其债务带来太大风险的迹象。
我们通过查看公司的净债务除以利息、税项、折旧和摊销前收益(EBITDA),并计算其息税前收益(EBIT)覆盖利息支出(利息覆盖)的容易程度,来衡量公司的债务负担与其盈利能力的关系。这种方法的优点是,我们既考虑了债务的绝对数量(净债务与EBITDA之比),也考虑了与债务相关的实际利息支出(及其利息覆盖率)。
Clean Harbors的债务与EBITDA之比为2.7,EBIT覆盖了利息支出的5.0倍。这表明,尽管债务水平很高,但我们不会说它们有问题。重要的是,Clean Harbors在过去12个月中息税前利润增长了62%,这一增长将使其更容易处理债务。当你分析债务时,资产负债表显然是你关注的领域。但最终,未来业务的盈利能力将决定Clean Harbors能否随着时间的推移加强其资产负债表。因此,如果你想看看专业人士的想法,你可能会发现这份关于分析师利润预测的免费报告很有趣。
但我们的最后考虑也很重要,因为一家公司不能用账面利润来偿还债务;它需要冷硬现金。因此,我们总是检查EBIT中有多少转化为自由现金流。在最近三年中,Clean Harbors录得的自由现金流相当于其息税前利润的71%,考虑到自由现金流不包括利息和税收,这一数字接近正常水平。这种自由现金流使公司在适当的时候处于偿还债务的有利地位。
我们的观点
Clean Harbors的息税前利润增长率表明,它可以轻松处理债务,就像克里斯蒂亚诺·罗纳尔多在对阵14岁以下门将的比赛中进球一样。但是,在更悲观的方面,我们有点担心它对EBITDA的净债务。考虑到所有这些因素,Clean Harbors似乎可以轻松应对目前的债务水平。当然,虽然这种杠杆可以提高股本回报率,但它确实带来了更多风险,因此值得关注这一点。毫无疑问,我们从资产负债表中了解到的债务最多。但归根结底,每家公司都可能包含存在于资产负债表之外的风险。例如,Clean Harbors拥有2个警告标志(还有一点不可忽视)我们认为你应该知道这一点。
总而言之,有时候专注于甚至不需要债务的公司会更容易。读者可以访问净债务为零的成长型股票列表100%免费,现在。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。