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.
伯克希爾哈撒韋的外部基金經理理想汽車·盧直言不諱地説,最大的投資風險不是價格的波動,而是你是否會遭受永久性的資本損失。當你考察一家公司的風險有多大時,考慮它的資產負債表是很自然的,因為當一家企業倒閉時,債務往往會涉及到它。我們可以看到清潔港灣公司(紐約證券交易所股票代碼:CLH)確實在其業務中使用債務。但更重要的問題是:這筆債務造成了多大的風險?
債務在什麼時候是危險的?
一般來説,只有當一家公司無法輕鬆償還債務時,債務才會成為一個真正的問題,無論是通過籌集資金還是用自己的現金流。資本主義的一部分是“創造性破壞”的過程,破產的企業被銀行家無情地清算。然而,一種更常見(但仍然昂貴)的情況是,一家公司必須以低廉的股價稀釋股東的股份,才能控制債務。當然,在企業中,債務可以是一個重要的工具,特別是資本密集型企業。當我們檢查債務水平時,我們首先同時考慮現金和債務水平。
查看我們對清潔港口的最新分析
清潔港口公司揹負着多少債務?
你可以點擊下圖查看歷史數據,但它顯示,截至2022年6月,Clean Harbors的債務為25.3億美元,比一年前增加了15.8億美元。然而,它也有4.154億美元的現金,因此其淨債務為21.1億美元。
紐約證券交易所:CLH債轉股歷史2022年9月8日
Clean Harbors的資產負債表有多健康?
我們可以從最近的資產負債表中看到,Clean Harbors有9.901億美元的債務在一年內到期,超過一年的債務有32.2億美元到期。另一方面,它有4.154億美元的現金和11.4億美元的應收賬款在一年內到期。因此,它的負債比現金和(近期)應收賬款之和高出26.5億美元。
Clean Harbors的市值為64.7億美元,因此如果有需要,它很可能會籌集現金來改善其資產負債表。但我們肯定希望密切關注其債務帶來太大風險的跡象。
我們通過查看公司的淨債務除以利息、税項、折舊和攤銷前收益(EBITDA),並計算其息税前收益(EBIT)覆蓋利息支出(利息覆蓋)的容易程度,來衡量公司的債務負擔與其盈利能力的關係。這種方法的優點是,我們既考慮了債務的絕對數量(淨債務與EBITDA之比),也考慮了與債務相關的實際利息支出(及其利息覆蓋率)。
Clean Harbors的債務與EBITDA之比為2.7,EBIT覆蓋了利息支出的5.0倍。這表明,儘管債務水平很高,但我們不會説它們有問題。重要的是,Clean Harbors在過去12個月中息税前利潤增長了62%,這一增長將使其更容易處理債務。當你分析債務時,資產負債表顯然是你關注的領域。但最終,未來業務的盈利能力將決定Clean Harbors能否隨着時間的推移加強其資產負債表。因此,如果你想看看專業人士的想法,你可能會發現這份關於分析師利潤預測的免費報告很有趣。
但我們的最後考慮也很重要,因為一家公司不能用賬面利潤來償還債務;它需要冷硬現金。因此,我們總是檢查EBIT中有多少轉化為自由現金流。在最近三年中,Clean Harbors錄得的自由現金流相當於其息税前利潤的71%,考慮到自由現金流不包括利息和税收,這一數字接近正常水平。這種自由現金流使公司在適當的時候處於償還債務的有利地位。
我們的觀點
Clean Harbors的息税前利潤增長率表明,它可以輕鬆處理債務,就像克里斯蒂亞諾·羅納爾多在對陣14歲以下門將的比賽中進球一樣。但是,在更悲觀的方面,我們有點擔心它對EBITDA的淨債務。考慮到所有這些因素,Clean Harbors似乎可以輕鬆應對目前的債務水平。當然,雖然這種槓桿可以提高股本回報率,但它確實帶來了更多風險,因此值得關注這一點。毫無疑問,我們從資產負債表中瞭解到的債務最多。但歸根結底,每家公司都可能包含存在於資產負債表之外的風險。例如,Clean Harbors擁有2個警告標誌(還有一點不可忽視)我們認為你應該知道這一點。
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。
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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。