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. Importantly, Skyline Champion Corporation (NYSE:SKY) does carry debt. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.
View our latest analysis for Skyline Champion
What Is Skyline Champion's Net Debt?
As you can see below, Skyline Champion had US$50.3m of debt at July 2022, down from US$68.1m a year prior. But it also has US$463.8m in cash to offset that, meaning it has US$413.5m net cash.
NYSE:SKY Debt to Equity History September 15th 2022
How Strong Is Skyline Champion's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Skyline Champion had liabilities of US$370.2m due within 12 months and liabilities of US$59.5m due beyond that. On the other hand, it had cash of US$463.8m and US$128.6m worth of receivables due within a year. So it can boast US$162.6m more liquid assets than total liabilities.
This short term liquidity is a sign that Skyline Champion could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Skyline Champion has more cash than debt is arguably a good indication that it can manage its debt safely.
Better yet, Skyline Champion grew its EBIT by 183% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. 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 Skyline Champion 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.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. Skyline Champion may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Skyline Champion recorded free cash flow worth 63% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.
Summing Up
While it is always sensible to investigate a company's debt, in this case Skyline Champion has US$413.5m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 183% over the last year. So is Skyline Champion's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with Skyline Champion , and understanding them should be part of your investment process.
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。重要的是天際線冠軍公司(紐約證券交易所代碼:SKY)確實揹負着債務。但更重要的問題是:這筆債務造成了多大的風險?
什麼時候債務是個問題?
債務幫助企業,直到企業難以償還債務,無論是用新資本還是用自由現金流。最終,如果公司不能履行其償還債務的法定義務,股東可能會一無所有地離開。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,許多公司利用債務為增長提供資金,沒有任何負面後果。在考慮一家公司的債務水平時,第一步是同時考慮其現金和債務。
查看我們對Skyline冠軍的最新分析
天際線冠軍的淨債務是多少?
如下所示,截至2022年7月,Skyline Champion的債務為5030萬美元,低於一年前的6810萬美元。但它也有4.638億美元的現金來抵消這一點,這意味着它有4.135億美元的淨現金。
紐約證券交易所:天空債轉股歷史2022年9月15日
天際冠軍的資產負債表有多強勁?
放大最新的資產負債表數據,我們可以看到Skyline Champion有3.702億美元的債務在12個月內到期,還有5950萬美元的債務在12個月後到期。另一方面,它有4.638億美元的現金和價值1.286億美元的應收賬款在一年內到期。因此,它可以吹噓自己的流動資產比總計負債。
這種短期流動性是一個跡象,表明Skyline Champion很可能可以輕鬆償還債務,因為其資產負債表遠未捉襟見肘。簡而言之,Skyline Champion擁有比債務更多的現金,這可以説是一個很好的跡象,表明它能夠安全地管理債務。
更好的是,Skyline冠軍去年的息税前利潤增長了183%,這是一個令人印象深刻的進步。這一提振將使未來償還債務變得更加容易。當你分析債務時,資產負債表顯然是你關注的領域。但最終,該業務未來的盈利能力將決定天際冠軍能否隨着時間的推移加強其資產負債表。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,一家公司只能用冷硬現金償還債務,而不是會計利潤。Skyline Champion的資產負債表上可能有淨現金,但看看該業務將息税前收益(EBIT)轉換為自由現金流的情況仍然很有趣,因為這將影響其對債務的需求和管理債務的能力。在最近三年中,Skyline Champion錄得的自由現金流相當於其息税前利潤的63%,考慮到自由現金流不包括利息和税收,這一數字接近正常。這種冷酷的現金意味着,它可以在想要的時候減少債務。
總結
儘管調查一家公司的債務總是明智的,但在這起案件中,Skyline Champion擁有4.135億美元的淨現金和體面的資產負債表。去年息税前利潤增長了183%,給我們留下了深刻的印象。那麼,Skyline Champion的債務是一個風險嗎?但在我們看來並非如此。毫無疑問,我們從資產負債表中瞭解到的債務最多。然而,並非所有投資風險都存在於資產負債表中--遠非如此。我們已經確定了兩個警告信號與Skyline Champion合作,瞭解他們應該是你投資過程的一部分。
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。