NRG Energy Bonds
| NRG Stock | USD 72.61 1.12 1.57% |
NRG Energy holds a debt-to-equity ratio of 1.568. At this time, NRG Energy's Short and Long Term Debt is most likely to decrease significantly in the upcoming years. The NRG Energy's current Net Debt To EBITDA is estimated to increase to 33.70, while Net Debt is projected to decrease to roughly 8.9 B. NRG Energy's financial risk is the risk to NRG 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
NRG 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. NRG 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 NRG Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect NRG Energy's stakeholders.
NRG Energy Quarterly Net Debt |
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For most companies, including NRG Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running NRG 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 7.0369 | Book Value 10.839 | Operating Margin (0.08) | Profit Margin (0.01) | Return On Assets (0.02) |
Given that NRG Energy's 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 NRG Energy 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 NRG Energy to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, NRG Energy is said to be less leveraged. If creditors hold a majority of NRG Energy's assets, the Company is said to be highly leveraged.
At this time, NRG Energy's Short and Long Term Debt is most likely to decrease significantly in the upcoming years. The NRG Energy's current Net Debt To EBITDA is estimated to increase to 33.70, while Net Debt is projected to decrease to roughly 8.9 B. NRG |
NRG Energy Bond Ratings
NRG Energy bond ratings play a critical role in determining how much NRG 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 NRG Energy's borrowing costs.| Piotroski F Score | 4 Poor |
| Beneish M Score | -2.28 Unlikely Manipulator |
NRG Energy Debt to Cash Allocation
As NRG Energy follows its natural business cycle, the capital allocation decisions will not magically go away. NRG 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 10.97 B in debt with debt to equity (D/E) ratio of 1.57, which is OK given its current industry classification. NRG Energy has a current ratio of 1.26, demonstrating that it may not be capable to disburse its financial commitments when the payables are due. Debt can assist NRG Energy until it has trouble settling it off, either with new capital or with free cash flow. So, NRG 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 NRG Energy sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for NRG to invest in growth at high rates of return. When we think about NRG Energy's use of debt, we should always consider it together with cash and equity.NRG Energy Total Assets Over Time
NRG 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 NRG Energy's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of NRG Energy, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a NRG Energy debt ratio should be compared their industry average or other competing firms.NRG Energy Corporate Bonds Issued
NRG Energy issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. NRG Energy uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most NRG bonds can be classified according to their maturity, which is the date when NRG Energy has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
NRG Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning NRG Energy Use of Financial Leverage
NRG Energy financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures NRG 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 NRG Energy assets, the company is considered highly leveraged. Understanding the composition and structure of overall NRG 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 NRG 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 NRG 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 | 11 B | 10.1 B | |
| Net Debt | 10.4 B | 8.9 B | |
| Short Term Debt | 710 M | 569.7 M | |
| Long Term Debt | 10.1 B | 10.3 B | |
| Long Term Debt Total | 7.2 B | 9.6 B | |
| Short and Long Term Debt | 620 M | 651 M | |
| Net Debt To EBITDA | 32.09 | 33.70 | |
| Debt To Equity | 3.78 | 3.96 | |
| Interest Debt Per Share | 51.04 | 27.62 | |
| Debt To Assets | 0.42 | 0.56 | |
| Long Term Debt To Capitalization | 0.78 | 0.60 | |
| Total Debt To Capitalization | 0.79 | 0.57 | |
| Debt Equity Ratio | 3.78 | 3.96 | |
| Debt Ratio | 0.42 | 0.56 | |
| Cash Flow To Debt Ratio | (0.02) | (0.02) |
NRG Energy Investors Sentiment
The influence of NRG Energy's investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in NRG. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock market does not have solid backing from leading economists and market statisticians.
Investor biases related to NRG Energy's public news can be used to forecast risks associated with an investment in NRG. The trend in average sentiment can be used to explain how an investor holding NRG can time the market purely based on public headlines and social activities around NRG Energy. Please note that most equities that are difficult to arbitrage are affected by market sentiment the most.
NRG Energy's market sentiment shows the aggregated news analyzed to detect positive and negative mentions from the text and comments. The data is normalized to provide daily scores for NRG Energy's and other traded tickers. The bigger the bubble, the more accurate is the estimated score. Higher bars for a given day show more participation in the average NRG Energy's news discussions. The higher the estimated score, the more favorable is the investor's outlook on NRG Energy.
NRG Energy Implied Volatility | 40.92 |
NRG Energy's implied volatility exposes the market's sentiment of NRG Energy stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if NRG Energy's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that NRG Energy stock will not fluctuate a lot when NRG Energy's options are near their expiration.
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 NRG 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, NRG Energy's short interest history, or implied volatility extrapolated from NRG Energy options trading.
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When running NRG Energy's price analysis, check to measure NRG 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 NRG Energy is operating at the current time. Most of NRG Energy's value examination focuses on studying past and present price action to predict the probability of NRG 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 NRG Energy's price. Additionally, you may evaluate how the addition of NRG Energy to your portfolios can decrease your overall portfolio volatility.
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Is NRG 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 NRG Energy. If investors know NRG 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 NRG 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 3.946 | Dividend Share 1.54 | Earnings Share (1.12) | Revenue Per Share 126.417 | Quarterly Revenue Growth (0.13) |
The market value of NRG Energy is measured differently than its book value, which is the value of NRG that is recorded on the company's balance sheet. Investors also form their own opinion of NRG Energy's value that differs from its market value or its book value, called intrinsic value, which is NRG 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 NRG Energy's market value can be influenced by many factors that don't directly affect NRG 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 NRG Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if NRG Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, NRG 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.