Applied Optoelectronics Current Financial Leverage

A59 -  Germany Stock  

EUR 5.80  0.15  2.52%

Applied Optoelectronics' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Applied Optoelectronics' financial risk is the risk to Applied Optoelectronics 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).
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Given the importance of Applied Optoelectronics' capital structure, the first step in the capital decision process is for the management of Applied Optoelectronics to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Applied Optoelectronics Inc to issue bonds at a reasonable cost.

Applied Optoelectronics Financial Leverage Rating

Applied Optoelectronics Inc bond ratings play a critical role in determining how much Applied Optoelectronics 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 Applied Optoelectronics' borrowing costs.
Overall Bond Rating
Not Rated
Average S&P Rating
N/A

Applied Optoelectronics Debt to Cash Allocation

As Applied Optoelectronics Inc follows its natural business cycle, the capital allocation decisions will not magically go away. Applied Optoelectronics' 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 154.75 M in total debt with debt to equity ratio (D/E) of 0.56, which is about average as compared to similar companies. Applied Optoelectronics has a current ratio of 2.25, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due.

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

Understaning Applied Optoelectronics Use of Financial Leverage

Applied Optoelectronics financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Applied Optoelectronics'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 Applied Optoelectronics assets, the company is considered highly leveraged. Understanding the composition and structure of overall Applied Optoelectronics 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.
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Applied Optoelectronics, Inc. designs, manufactures, and sells various fiber-optic networking products worldwide. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas. Applied Optoelectronics operates under Semiconductors classification in Germany and is traded on Stuttgart Stock Exchange. It employs 2682 people.

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Pair Trading with Applied Optoelectronics

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 Applied Optoelectronics 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 Applied Optoelectronics will appreciate offsetting losses from the drop in the long position's value.

Applied Optoelectronics Pair Correlation

Equities Pair Trading Analysis

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Please continue to the analysis of Applied Optoelectronics Fundamentals Over Time. Note that the Applied Optoelectronics information on this page should be used as a complementary analysis to other Applied Optoelectronics' 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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When running Applied Optoelectronics price analysis, check to measure Applied Optoelectronics' 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 Applied Optoelectronics is operating at the current time. Most of Applied Optoelectronics' value examination focuses on studying past and present price action to predict the probability of Applied Optoelectronics' future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Applied Optoelectronics' price. Additionally, you may evaluate how the addition of Applied Optoelectronics to your portfolios can decrease your overall portfolio volatility.
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