Hilltop Holdings Current Financial Leverage

WXF Stock  EUR 28.60  0.20  0.70%   
Hilltop Holdings holds a debt-to-equity ratio of 0.0. Hilltop Holdings' financial risk is the risk to Hilltop Holdings 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).
Given that Hilltop Holdings' 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 Hilltop Holdings 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 Hilltop Holdings to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Hilltop Holdings is said to be less leveraged. If creditors hold a majority of Hilltop Holdings' assets, the Company is said to be highly leveraged.
  
Check out the analysis of Hilltop Holdings Fundamentals Over Time.
For more detail on how to invest in Hilltop Stock please use our How to Invest in Hilltop Holdings guide.

Hilltop Holdings Bond Ratings

Hilltop Holdings bond ratings play a critical role in determining how much Hilltop Holdings 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 Hilltop Holdings' borrowing costs.

Hilltop Holdings Debt to Cash Allocation

As Hilltop Holdings follows its natural business cycle, the capital allocation decisions will not magically go away. Hilltop Holdings' 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 accumulated 346.65 M in total debt. Debt can assist Hilltop Holdings until it has trouble settling it off, either with new capital or with free cash flow. So, Hilltop Holdings' 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 Hilltop Holdings sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Hilltop to invest in growth at high rates of return. When we think about Hilltop Holdings' use of debt, we should always consider it together with cash and equity.

Hilltop Holdings 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 Hilltop Holdings' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Hilltop Holdings, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Hilltop Holdings debt ratio should be compared their industry average or other competing firms.

Hilltop Holdings Corporate Bonds Issued

Hilltop Holdings 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. Hilltop Holdings 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 Hilltop bonds can be classified according to their maturity, which is the date when Hilltop Holdings 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.

Understaning Hilltop Holdings Use of Financial Leverage

Hilltop Holdings financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Hilltop Holdings'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 Hilltop Holdings assets, the company is considered highly leveraged. Understanding the composition and structure of overall Hilltop Holdings 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 Hilltop Holdings' 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 Hilltop Holdings' 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).
Hilltop Holdings Inc. provides banking and financial products and services. Hilltop Holdings Inc. was founded in 1998 and is headquartered in Dallas, Texas. HILLTOP HLDGS operates under Banks - Regional - US classification in Germany and is traded on Frankfurt Stock Exchange. It employs 5200 people.
Please read more on our technical analysis page.

Also Currently Popular

Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.
When determining whether Hilltop Holdings offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Hilltop Holdings' financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Hilltop Holdings Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Hilltop Holdings Stock:
Check out the analysis of Hilltop Holdings Fundamentals Over Time.
For more detail on how to invest in Hilltop Stock please use our How to Invest in Hilltop Holdings guide.
You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Complementary Tools for Hilltop Stock analysis

When running Hilltop Holdings' price analysis, check to measure Hilltop Holdings' 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 Hilltop Holdings is operating at the current time. Most of Hilltop Holdings' value examination focuses on studying past and present price action to predict the probability of Hilltop Holdings' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Hilltop Holdings' price. Additionally, you may evaluate how the addition of Hilltop Holdings to your portfolios can decrease your overall portfolio volatility.
ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
AI Investment Finder
Use AI to screen and filter profitable investment opportunities
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Fundamental Analysis
View fundamental data based on most recent published financial statements
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing
Please note, there is a significant difference between Hilltop Holdings' value and its price as these two are different measures arrived at by different means. Investors typically determine if Hilltop Holdings is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Hilltop Holdings' 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.