Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Penske Automotive Group, Inc. (NYSE:PAG) makes use of debt. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.
Check out our latest analysis for Penske Automotive Group
How Much Debt Does Penske Automotive Group Carry?
As you can see below, Penske Automotive Group had US$3.93b of debt, at June 2022, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$154.9m in cash offsetting this, leading to net debt of about US$3.77b.
NYSE:PAG Debt to Equity History September 16th 2022
A Look At Penske Automotive Group's Liabilities
We can see from the most recent balance sheet that Penske Automotive Group had liabilities of US$4.21b falling due within a year, and liabilities of US$5.07b due beyond that. Offsetting these obligations, it had cash of US$154.9m as well as receivables valued at US$774.3m due within 12 months. So its liabilities total US$8.36b more than the combination of its cash and short-term receivables.
When you consider that this deficiency exceeds the company's US$7.88b market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price.
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). 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).
Penske Automotive Group's net debt to EBITDA ratio of about 2.3 suggests only moderate use of debt. And its strong interest cover of 17.0 times, makes us even more comfortable. Importantly, Penske Automotive Group grew its EBIT by 33% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Penske Automotive Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, Penske Automotive Group generated free cash flow amounting to a very robust 92% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.
Our View
The good news is that Penske Automotive Group's demonstrated ability to cover its interest expense with its EBIT delights us like a fluffy puppy does a toddler. But we must concede we find its level of total liabilities has the opposite effect. Looking at all the aforementioned factors together, it strikes us that Penske Automotive Group can handle its debt fairly comfortably. On the plus side, this leverage can boost shareholder returns, but the potential downside is more risk of loss, so it's worth monitoring the balance sheet. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 4 warning signs we've spotted with Penske Automotive Group (including 1 which can't be ignored) .
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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.
巴菲特(Warren Buffett)曾说过一句名言:波动性远非风险的代名词。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。与许多其他公司一样彭斯克汽车集团有限公司(纽约证券交易所代码:PAG)利用债务。但这笔债务对股东来说是一个担忧吗?
债务会带来什么风险?
债务是帮助企业发展的一种工具,但如果一家企业无法偿还贷款人的债务,那么它就只能听从贷款人的摆布。如果情况真的变得很糟糕,贷款人可以控制业务。尽管这并不常见,但我们确实经常看到负债累累的公司永久性地稀释股东的权益,因为贷款人迫使他们以令人沮丧的价格筹集资金。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。
查看我们对彭斯克汽车集团的最新分析
彭斯克汽车集团背负着多少债务?
如下所示,截至2022年6月,彭斯克汽车集团的债务为39.3亿美元,与前一年大致相同。您可以单击图表查看更多详细信息。然而,它确实有1.549亿美元的现金来抵消这一点,导致净债务约为37.7亿美元。
纽约证券交易所:PAG债转股历史2022年9月16日
彭斯克汽车集团负债情况一瞥
我们可以从最近的资产负债表中看到,彭斯克汽车集团有42.1亿美元的债务在一年内到期,超过一年的债务有50.7亿美元到期。为了抵消这些债务,它有1.549亿美元的现金以及价值7.743亿美元的应收账款在12个月内到期。因此,它的负债总额比现金和短期应收账款的总和多83.6亿美元。
当你考虑到这一缺口超过了该公司78.8亿美元的市值时,你很可能倾向于专心审查资产负债表。假设,如果该公司被迫通过以当前股价筹集资金来偿还债务,将需要极大的稀释。
我们使用两个主要比率来告知我们债务相对于收益的水平。第一个是净债务除以利息、税项、折旧和摊销前收益(EBITDA),第二个是其息税前收益(EBIT)覆盖其利息支出(或简称利息覆盖)的多少倍。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)。
Penske Automotive Group的净债务与EBITDA之比约为2.3,表明仅适度使用债务。而其17.0倍的强劲利息覆盖,让我们更加舒心。重要的是,彭斯克汽车集团在过去12个月中息税前利润增长了33%,这一增长将使其更容易处理债务。毫无疑问,我们从资产负债表中了解到的债务最多。但最终,该业务未来的盈利能力将决定彭斯克汽车集团能否随着时间的推移加强其资产负债表。所以,如果你关注未来,你可以看看这个免费显示分析师利润预测的报告。
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,有必要检查这笔息税前利润中有多少是由自由现金流支持的。在过去的三年里,彭斯克汽车集团产生了相当强劲的自由现金流,占其息税前利润的92%,超出了我们的预期。这使它处于有利的地位,如果需要的话,它可以偿还债务。
我们的观点
好消息是,彭斯克汽车集团被证明有能力通过息税前利润来支付利息支出,这让我们感到高兴,就像一只毛茸茸的小狗对待蹒跚学步的孩子一样。但我们必须承认,我们发现它的总负债水平产生了相反的效果。综合上述因素来看,彭斯克汽车集团可以相当轻松地处理其债务。有利的一面是,这种杠杆可以提高股东回报,但潜在的不利因素是更大的亏损风险,因此值得监控资产负债表。当你分析债务时,资产负债表显然是你关注的领域。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。为此,您应该了解4个警示标志我们已经发现了彭斯克汽车集团(Penske Automotive Group)(包括1家不容忽视的公司)。
如果你对一家增长迅速、资产负债表坚如磐石的公司更感兴趣,那么请立即查看我们的净现金成长型股票清单。
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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。