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We Think Techtronic Industries (HKG:669) Can Stay On Top Of Its Debt
We Think Techtronic Industries (HKG:669) Can Stay On Top Of Its Debt
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Techtronic Industries Company Limited (HKG:669) does use debt in its business. But the real question is whether this debt is making the company risky.
Why Does Debt Bring Risk?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company 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 and debt together.
Check out our latest analysis for Techtronic Industries
How Much Debt Does Techtronic Industries Carry?
The image below, which you can click on for greater detail, shows that at June 2022 Techtronic Industries had debt of US$3.39b, up from US$2.99b in one year. However, it does have US$1.69b in cash offsetting this, leading to net debt of about US$1.71b.
SEHK:669 Debt to Equity History August 19th 2022How Strong Is Techtronic Industries' Balance Sheet?
The latest balance sheet data shows that Techtronic Industries had liabilities of US$6.61b due within a year, and liabilities of US$1.86b falling due after that. Offsetting this, it had US$1.69b in cash and US$2.24b in receivables that were due within 12 months. So its liabilities total US$4.54b more than the combination of its cash and short-term receivables.
Of course, Techtronic Industries has a titanic market capitalization of US$24.2b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward.
In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Techtronic Industries has a low net debt to EBITDA ratio of only 1.2. And its EBIT easily covers its interest expense, being 97.4 times the size. So you could argue it is no more threatened by its debt than an elephant is by a mouse. Also good is that Techtronic Industries grew its EBIT at 16% over the last year, further increasing its ability to manage debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Techtronic Industries's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Techtronic Industries saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.
Our View
Based on what we've seen Techtronic Industries is not finding it easy, given its conversion of EBIT to free cash flow, but the other factors we considered give us cause to be optimistic. In particular, we are dazzled with its interest cover. When we consider all the factors mentioned above, we do feel a bit cautious about Techtronic Industries's use of debt. While we appreciate debt can enhance returns on equity, we'd suggest that shareholders keep close watch on its debt levels, lest they increase. We'd be motivated to research the stock further if we found out that Techtronic Industries insiders have bought shares recently. If you would too, then you're in luck, since today we're sharing our list of reported insider transactions for free.
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.
馬克斯説得很好,他不是擔心股價波動,而是我擔心的是永久虧損的可能性……我認識的每個實際投資者都擔心。因此,當你評估一家公司的風險有多大時,聰明的投資者似乎知道債務--通常涉及破產--是一個非常重要的因素。我們可以看到創科實業股份有限公司(HKG:669)確實在其業務中使用債務。但真正的問題是,這筆債務是否讓該公司面臨風險。
為什麼債務會帶來風險?
當一家企業無法輕鬆履行這些義務時,債務和其他債務就會變得有風險,無論是通過自由現金流還是通過以有吸引力的價格籌集資本。如果情況真的變得很糟糕,貸款人可以控制業務。然而,一種更常見(但仍令人痛苦)的情景是,它不得不以低價籌集新的股本,從而永久性地稀釋股東。當然,債務的好處是,它往往代表着廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。當考慮一家企業使用了多少債務時,首先要做的是把現金和債務放在一起看。
看看我們對創科實業的最新分析
創科實業揹負着多少債務?
點擊查看更多細節的下圖顯示,截至2022年6月,創科實業的債務為33.9億美元,高於一年內的29.9億美元。然而,它確實有16.9億美元的現金來抵消這一點,導致淨債務約為17.1億美元。
聯交所:669債轉股歷史2022年8月19日創科實業的資產負債表有多強?
最新的資產負債表數據顯示,創科實業有66.1億美元的負債在一年內到期,18.6億美元的負債在一年內到期。作為抵消,它有16.9億美元的現金和22.4億美元的應收賬款在12個月內到期。因此,它的負債總額比現金和短期應收賬款的總和多45.4億美元。
當然,創科實業擁有242億美元的鉅額市值,因此這些負債可能是可控的。但有足夠的負債,我們肯定會建議股東繼續監控未來的資產負債表。
為了評估一家公司的債務相對於它的收益,我們計算它的淨債務除以它的利息、税項、折舊和攤銷前收益(EBITDA)和它的利息和税前收益(EBIT)除以它的利息支出(它的利息覆蓋)。因此,我們考慮債務相對於收益,包括折舊和攤銷費用。
創科實業的淨債務與EBITDA之比較低,僅為1.2。而且它的息税前利潤輕鬆覆蓋了利息支出,是其規模的97.4倍。因此,你可以辯稱,它不會受到債務的威脅,就像大象受到老鼠的威脅一樣。另一個好消息是,創科實業去年息税前利潤增長了16%,進一步增強了其管理債務的能力。當你分析債務時,資產負債表顯然是你關注的領域。但最重要的是,未來的收益將決定創科實業未來能否保持健康的資產負債表。所以,如果你關注未來,你可以看看這個免費顯示分析師利潤預測的報告。
最後,企業需要自由現金流來償還債務;會計利潤只是不能削減這一點。因此,我們顯然需要看看息税前利潤是否會帶來相應的自由現金流。在過去的三年裏,創科實業的自由現金流總計出現了大幅負增長。儘管這可能是增長支出的結果,但它確實使債務的風險大得多。
我們的觀點
根據我們所看到的,鑑於創科實業將息税前利潤轉換為自由現金流,這並不容易,但我們考慮的其他因素讓我們有理由樂觀。特別是,它的利息封面讓我們眼花繚亂。當我們考慮到上述所有因素時,我們確實對創科實業的舉債方式感到有點謹慎。雖然我們認識到債務可以提高股本回報率,但我們建議股東密切關注其債務水平,以免增加。如果我們發現創科實業的內部人士最近買入了股票,我們就會有動力進一步研究這隻股票。如果你也願意,那麼你就幸運了,因為今天我們免費分享了我們報告的內幕交易名單。
總而言之,有時候專注於甚至不需要債務的公司會更容易。讀者可以訪問淨債務為零的成長型股票列表100%免費,現在。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
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moomoo是Moomoo Technologies Inc.公司提供的金融資訊和交易應用程式。
在美國,moomoo上的投資產品和服務由Moomoo Financial Inc.提供,一家受美國證券交易委員會(SEC)監管的持牌主體。 Moomoo Financial Inc.是金融業監管局(FINRA)和證券投資者保護公司(SIPC)的成員。
在新加坡,moomoo上的投資產品和服務是通過Moomoo Financial Singapore Pte. Ltd.提供,該公司受新加坡金融管理局(MAS)監管(牌照號碼︰CMS101000) ,持有資本市場服務牌照 (CMS) ,持有財務顧問豁免(Exempt Financial Adviser)資質。本內容未經新加坡金融管理局的審查。
在澳大利亞,moomoo上的金融產品和服務是通過Futu Securities (Australia) Ltd提供,該公司是受澳大利亞證券和投資委員會(ASIC)監管的澳大利亞金融服務許可機構(AFSL No. 224663)。請閱讀並理解我們的《金融服務指南》、《條款與條件》、《隱私政策》和其他披露文件,這些文件可在我們的網站 https://www.moomoo.com/au中獲取。
在加拿大,透過moomoo應用程式提供的僅限訂單執行的券商服務由Moomoo Financial Canada Inc.提供,並受加拿大投資監管機構(CIRO)監管。
在馬來西亞,moomoo上的投資產品和服務是透過Moomoo Securities Malaysia Sdn. Bhd. 提供,該公司受馬來西亞證券監督委員會(SC)監管(牌照號碼︰eCMSL/A0397/2024) ,持有資本市場服務牌照 (CMSL) 。本內容未經馬來西亞證券監督委員會的審查。
Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd.,Futu Securities (Australia) Ltd, Moomoo Financial Canada Inc和Moomoo Securities Malaysia Sdn. Bhd., 是關聯公司。
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