NovaGold Resources Current Financial Leverage
| NG Stock | USD 3.07 0.06 1.92% |
NovaGold Resources holds a debt-to-equity ratio of 2.987. At this time, NovaGold Resources' Long Term Debt is most likely to increase significantly in the upcoming years. The NovaGold Resources' current Debt To Assets is estimated to increase to 0.98, while Long Term Debt Total is projected to decrease to roughly 106.3 M. NovaGold Resources' financial risk is the risk to NovaGold Resources 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
NovaGold Resources' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. NovaGold Resources' 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 NovaGold Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect NovaGold Resources' stakeholders.
For most companies, including NovaGold Resources, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running NovaGold Resources 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 25.8 K | Book Value (0.05) | Return On Assets (0.10) | Return On Equity (17.91) |
Given that NovaGold Resources' debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which NovaGold Resources is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of NovaGold Resources to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, NovaGold Resources is said to be less leveraged. If creditors hold a majority of NovaGold Resources' assets, the Company is said to be highly leveraged.
At this time, NovaGold Resources' Long Term Debt is most likely to increase significantly in the upcoming years. The NovaGold Resources' current Debt To Assets is estimated to increase to 0.98, while Long Term Debt Total is projected to decrease to roughly 106.3 M. NovaGold |
NovaGold Resources Financial Leverage Rating
NovaGold Resources bond ratings play a critical role in determining how much NovaGold Resources 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 NovaGold Resources' borrowing costs.| Piotroski F Score | 5 Healthy |
| Beneish M Score | -4.08 Unlikely Manipulator |
NovaGold Resources Debt to Cash Allocation
As NovaGold Resources follows its natural business cycle, the capital allocation decisions will not magically go away. NovaGold Resources' 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 reports 137.55 M of total liabilities with total debt to equity ratio (D/E) of 2.99, which may imply that the company relies heavily on debt financing. NovaGold Resources has a current ratio of 44.53, indicating that it is in good position to pay out its debt commitments in time. Debt can assist NovaGold Resources until it has trouble settling it off, either with new capital or with free cash flow. So, NovaGold Resources' 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 NovaGold Resources sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for NovaGold to invest in growth at high rates of return. When we think about NovaGold Resources' use of debt, we should always consider it together with cash and equity.NovaGold Resources Total Assets Over Time
NovaGold Resources 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 NovaGold Resources' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of NovaGold Resources, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a NovaGold Resources debt ratio should be compared their industry average or other competing firms.NovaGold Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning NovaGold Resources Use of Financial Leverage
NovaGold Resources financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures NovaGold Resources'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 NovaGold Resources assets, the company is considered highly leveraged. Understanding the composition and structure of overall NovaGold Resources 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 NovaGold Resources' 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 NovaGold Resources' 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 | 158.2 M | 166.1 M | |
| Net Debt | 105.6 M | 110.8 M | |
| Short Term Debt | 220.8 K | 209.8 K | |
| Long Term Debt | 157.3 M | 165.1 M | |
| Short and Long Term Debt | 0.00 | 0.00 | |
| Long Term Debt Total | 142.2 M | 106.3 M | |
| Net Debt To EBITDA | (4.87) | (4.63) | |
| Debt To Equity | (19.24) | (18.27) | |
| Interest Debt Per Share | 0.41 | 0.24 | |
| Debt To Assets | 0.93 | 0.98 | |
| Long Term Debt To Capitalization | 0.96 | 1.01 | |
| Total Debt To Capitalization | 0.96 | 1.01 | |
| Debt Equity Ratio | (19.24) | (18.27) | |
| Debt Ratio | 0.93 | 0.98 | |
| Cash Flow To Debt Ratio | (0.05) | (0.05) |
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 NovaGold Resources 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, NovaGold Resources' short interest history, or implied volatility extrapolated from NovaGold Resources options trading.
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Try AI Portfolio ArchitectCheck out the analysis of NovaGold Resources Fundamentals Over Time. For more detail on how to invest in NovaGold Stock please use our How to Invest in NovaGold Resources guide.Note that the NovaGold Resources information on this page should be used as a complementary analysis to other NovaGold Resources' 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Complementary Tools for NovaGold Stock analysis
When running NovaGold Resources' price analysis, check to measure NovaGold Resources' 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 NovaGold Resources is operating at the current time. Most of NovaGold Resources' value examination focuses on studying past and present price action to predict the probability of NovaGold Resources' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move NovaGold Resources' price. Additionally, you may evaluate how the addition of NovaGold Resources to your portfolios can decrease your overall portfolio volatility.
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Is NovaGold Resources' 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 NovaGold Resources. If investors know NovaGold 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 NovaGold Resources listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Earnings Share (0.14) | Return On Assets (0.10) | Return On Equity (17.91) |
The market value of NovaGold Resources is measured differently than its book value, which is the value of NovaGold that is recorded on the company's balance sheet. Investors also form their own opinion of NovaGold Resources' value that differs from its market value or its book value, called intrinsic value, which is NovaGold Resources' 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 NovaGold Resources' market value can be influenced by many factors that don't directly affect NovaGold Resources' 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 NovaGold Resources' value and its price as these two are different measures arrived at by different means. Investors typically determine if NovaGold Resources is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, NovaGold Resources' 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.