Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that ASGN Incorporated (NYSE:ASGN) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
Why Does Debt Bring Risk?
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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for ASGN
How Much Debt Does ASGN Carry?
As you can see below, ASGN had US$1.03b of debt, at June 2022, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$490.6m, its net debt is less, at about US$543.9m.
NYSE:ASGN Debt to Equity History October 4th 2022
How Strong Is ASGN's Balance Sheet?
We can see from the most recent balance sheet that ASGN had liabilities of US$492.4m falling due within a year, and liabilities of US$1.18b due beyond that. On the other hand, it had cash of US$490.6m and US$843.2m worth of receivables due within a year. So it has liabilities totalling US$334.6m more than its cash and near-term receivables, combined.
Since publicly traded ASGN shares are worth a total of US$4.68b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward.
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). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
ASGN's net debt is only 1.1 times its EBITDA. And its EBIT covers its interest expense a whopping 10.6 times over. So we're pretty relaxed about its super-conservative use of debt. In addition to that, we're happy to report that ASGN has boosted its EBIT by 34%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine ASGN's ability to maintain a healthy balance sheet going forward. 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 clearly need to look at whether that EBIT is leading to corresponding free cash flow. During the last three years, ASGN generated free cash flow amounting to a very robust 82% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.
Our View
Happily, ASGN's impressive conversion of EBIT to free cash flow implies it has the upper hand on its debt. And the good news does not stop there, as its EBIT growth rate also supports that impression! Overall, we don't think ASGN is taking any bad risks, as its debt load seems modest. So the balance sheet looks pretty healthy, to us. 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 be aware of the 1 warning sign we've spotted with ASGN .
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.
巴菲特(Warren Buffett)曾説過一句名言:波動性遠非風險的代名詞。當我們考慮一家公司的風險有多大時,我們總是喜歡看它對債務的使用,因為債務過重可能導致破產。我們注意到ASGN公司(紐約證券交易所代碼:ASGN)的資產負債表上確實有債務。但更重要的問題是:這筆債務造成了多大的風險?
為什麼債務會帶來風險?
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,許多公司利用債務為增長提供資金,沒有任何負面後果。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。
查看我們對ASGN的最新分析
ASGN揹負着多少債務?
如下所示,截至2022年6月,ASGN的債務為10.3億美元,與前一年大致相同。您可以單擊圖表查看更多詳細信息。然而,由於它擁有4.906億美元的現金儲備,其淨債務較少,約為5.439億美元。
紐約證券交易所:ASGN債轉股歷史2022年10月4日
ASGN的資產負債表有多強勁?
我們可以從最近的資產負債表中看到,ASGN有4.924億美元的債務在一年內到期,超過一年的債務有11.8億美元到期。另一方面,它有4.906億美元的現金和價值8.432億美元的應收賬款在一年內到期。因此,它的負債總額比現金和近期應收賬款加起來還要多3.346億美元。
由於上市交易的ASGN股票總價值為46.8億美元,這種負債水平似乎不太可能構成重大威脅。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。
我們使用兩個主要比率來告知我們債務相對於收益的水平。第一個是淨債務除以利息、税項、折舊和攤銷前收益(EBITDA),第二個是其息税前收益(EBIT)覆蓋其利息支出(或簡稱利息覆蓋)的多少倍。這樣,我們既考慮了債務的絕對量,也考慮了為其支付的利率。
ASGN的淨債務僅為其EBITDA的1.1倍。它的息税前利潤高達利息支出的10.6倍。因此,我們對它對債務的超級保守使用相當放鬆。除此之外,我們很高興地報告,ASGN將其息税前利潤提高了34%,從而減少了未來償還債務的幽靈。毫無疑問,我們從資產負債表中瞭解到的債務最多。但最重要的是,未來的收益將決定ASGN未來維持健康資產負債表的能力。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,ASGN產生了相當強勁的自由現金流,佔其息税前利潤的82%,超出了我們的預期。這使它處於有利的地位,如果需要的話,它可以償還債務。
我們的觀點
令人高興的是,ASGN令人印象深刻地將息税前利潤轉換為自由現金流意味着它在債務上佔據了上風。好消息不止於此,因為它的息税前利潤增長率也支持了這一印象!總體而言,我們認為ASGN沒有承擔任何不良風險,因為它的債務負擔似乎不大。因此,在我們看來,資產負債表看起來相當健康。當你分析債務時,資產負債表顯然是你關注的領域。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。為此,您應該意識到1個警告標誌我們發現了ASGN。
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。