Vaalco Energy Current Financial Leverage
| EGY Stock | USD 6.64 0.09 1.34% |
Vaalco Energy holds a debt-to-equity ratio of 0.018. At this time, Vaalco Energy's Short and Long Term Debt Total is fairly stable compared to the past year. Long Term Debt Total is likely to rise to about 94.5 M in 2024, whereas Net Debt is likely to drop (31.8 M) in 2024. Vaalco Energy's financial risk is the risk to Vaalco Energy stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Vaalco Energy's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Vaalco Energy's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Vaalco Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Vaalco Energy's stakeholders.
For most companies, including Vaalco Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Vaalco Energy the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book 1.5121 | Book Value 4.588 | Operating Margin 0.5594 | Profit Margin 0.1326 | Return On Assets 0.1183 |
Vaalco |
Vaalco Energy Financial Leverage Rating
Vaalco Energy bond ratings play a critical role in determining how much Vaalco Energy have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Vaalco Energy's borrowing costs.| Piotroski F Score | 6 Healthy |
| Beneish M Score | -2.84 Unlikely Manipulator |
Vaalco Energy Debt to Cash Allocation
As Vaalco Energy follows its natural business cycle, the capital allocation decisions will not magically go away. Vaalco Energy's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 90.8 M in debt with debt to equity (D/E) ratio of 0.02, which may show that the company is not taking advantage of profits from borrowing. Vaalco Energy has a current ratio of 0.84, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Debt can assist Vaalco Energy until it has trouble settling it off, either with new capital or with free cash flow. So, Vaalco Energy's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Vaalco Energy sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Vaalco to invest in growth at high rates of return. When we think about Vaalco Energy's use of debt, we should always consider it together with cash and equity.Vaalco Energy Total Assets Over Time
Vaalco Energy Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Vaalco Energy's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Vaalco Energy, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Vaalco Energy debt ratio should be compared their industry average or other competing firms.Vaalco Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Vaalco Energy Use of Financial Leverage
Vaalco Energy financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Vaalco Energy's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Vaalco Energy assets, the company is considered highly leveraged. Understanding the composition and structure of overall Vaalco Energy debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to Vaalco Energy's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Vaalco Energy's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 90.8 M | 95.3 M | |
| Net Debt | -30.3 M | -31.8 M | |
| Short Term Debt | 12.5 M | 9 M | |
| Long Term Debt | 0.00 | 0.00 | |
| Long Term Debt Total | 90 M | 94.5 M | |
| Short and Long Term Debt | 6 M | 8.8 M | |
| Net Debt To EBITDA | (0.11) | (0.11) | |
| Debt To Equity | 0.19 | 0.20 | |
| Interest Debt Per Share | 0.91 | 0.46 | |
| Debt To Assets | 0.11 | 0.20 | |
| Long Term Debt To Capitalization | 0.14 | 0.22 | |
| Total Debt To Capitalization | 0.16 | 0.13 | |
| Debt Equity Ratio | 0.19 | 0.20 | |
| Debt Ratio | 0.11 | 0.20 | |
| Cash Flow To Debt Ratio | 2.46 | 3.22 |
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards Vaalco Energy in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, Vaalco Energy's short interest history, or implied volatility extrapolated from Vaalco Energy options trading.
Pair Trading with Vaalco Energy
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Vaalco Energy position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vaalco Energy will appreciate offsetting losses from the drop in the long position's value.Moving together with Vaalco Stock
| 0.84 | AR | Antero Resources Corp Earnings Call This Week | PairCorr |
| 0.88 | PR | Permian Resources Financial Report 13th of May 2024 | PairCorr |
| 0.94 | SD | SandRidge Energy | PairCorr |
| 0.88 | SM | SM Energy Earnings Call This Week | PairCorr |
Moving against Vaalco Stock
| 0.67 | EP | Empire Petroleum Corp Downward Rally | PairCorr |
| 0.66 | VIVK | Vivakor Report 23rd of May 2024 | PairCorr |
The ability to find closely correlated positions to Vaalco Energy could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Vaalco Energy when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Vaalco Energy - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Vaalco Energy to buy it.
The correlation of Vaalco Energy is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Vaalco Energy moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Vaalco Energy moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Vaalco Energy can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Check out the analysis of Vaalco Energy Fundamentals Over Time. For more information on how to buy Vaalco Stock please use our How to Invest in Vaalco Energy guide.Note that the Vaalco Energy information on this page should be used as a complementary analysis to other Vaalco Energy's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Complementary Tools for Vaalco Stock analysis
When running Vaalco Energy's price analysis, check to measure Vaalco Energy's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Vaalco Energy is operating at the current time. Most of Vaalco Energy's value examination focuses on studying past and present price action to predict the probability of Vaalco Energy's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Vaalco Energy's price. Additionally, you may evaluate how the addition of Vaalco Energy to your portfolios can decrease your overall portfolio volatility.
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Is Vaalco Energy's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Vaalco Energy. If investors know Vaalco will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Vaalco Energy listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 1.386 | Dividend Share 0.25 | Earnings Share 0.56 | Revenue Per Share 4.278 | Quarterly Revenue Growth 0.544 |
The market value of Vaalco Energy is measured differently than its book value, which is the value of Vaalco that is recorded on the company's balance sheet. Investors also form their own opinion of Vaalco Energy's value that differs from its market value or its book value, called intrinsic value, which is Vaalco Energy's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Vaalco Energy's market value can be influenced by many factors that don't directly affect Vaalco Energy's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Vaalco Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if Vaalco Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Vaalco Energy's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.