Applied Opt Current Financial Leverage
| AAOI Stock | USD 11.26 0.13 1.17% |
Applied Opt holds a debt-to-equity ratio of 0.76. The current Short and Long Term Debt Total is estimated to decrease to about 89.5 M. The current Net Debt is estimated to decrease to about 45.6 MApplied Opt's financial risk is the risk to Applied Opt 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
Applied Opt'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. Applied Opt'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 Applied Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Applied Opt's stakeholders.
For most companies, including Applied Opt, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Applied Opt 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 2.0056 | Book Value 5.633 | Operating Margin (0.07) | Profit Margin (0.26) | Return On Assets (0.06) |
Applied |
Applied Opt Financial Leverage Rating
Applied Opt bond ratings play a critical role in determining how much Applied Opt 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 Opt's borrowing costs.| Piotroski F Score | 6 Healthy |
| Beneish M Score | -3.62 Unlikely Manipulator |
Applied Opt Debt to Cash Allocation
As Applied Opt follows its natural business cycle, the capital allocation decisions will not magically go away. Applied Opt'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 currently holds 121.07 M in liabilities with Debt to Equity (D/E) ratio of 0.76, which is about average as compared to similar companies. Applied Opt has a current ratio of 1.4, which is within standard range for the sector. Debt can assist Applied Opt until it has trouble settling it off, either with new capital or with free cash flow. So, Applied Opt'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 Applied Opt sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Applied to invest in growth at high rates of return. When we think about Applied Opt's use of debt, we should always consider it together with cash and equity.Applied Opt Common Stock Shares Outstanding Over Time
Applied Opt 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 Opt's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Applied Opt, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an Applied Opt debt ratio should be compared their industry average or other competing firms.Applied Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Applied Opt Use of Financial Leverage
Applied Opt financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Applied Opt'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 Opt assets, the company is considered highly leveraged. Understanding the composition and structure of overall Applied Opt 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 Applied Opt'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 Applied Opt'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 | 121.1 M | 89.5 M | |
| Net Debt | 75.7 M | 45.6 M | |
| Long Term Debt | 76.2 M | 53.3 M | |
| Short Term Debt | 40.1 M | 34 M | |
| Long Term Debt Total | 89.5 M | 56.4 M | |
| Short and Long Term Debt | 39 M | 33.8 M | |
| Net Debt To EBITDA | (2.82) | (2.96) | |
| Debt To Equity | 0.56 | 0.56 | |
| Interest Debt Per Share | 4.09 | 3.35 | |
| Debt To Assets | 0.31 | 0.22 | |
| Long Term Debt To Capitalization | 0.27 | 0.16 | |
| Total Debt To Capitalization | 0.36 | 0.35 | |
| Debt Equity Ratio | 0.56 | 0.56 | |
| Debt Ratio | 0.31 | 0.22 | |
| Cash Flow To Debt Ratio | (0.07) | (0.06) |
Applied Opt Implied Volatility | 110.52 |
Applied Opt's implied volatility exposes the market's sentiment of Applied Opt stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Applied Opt'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 Applied Opt stock will not fluctuate a lot when Applied Opt'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 Applied Opt 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, Applied Opt's short interest history, or implied volatility extrapolated from Applied Opt options trading.
Pair Trading with Applied Opt
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 Opt 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 Opt will appreciate offsetting losses from the drop in the long position's value.Moving against Applied Stock
| 0.77 | GE | GE Aerospace Buyout Trend | PairCorr |
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| 0.74 | AA | Alcoa Corp Financial Report 17th of July 2024 | PairCorr |
| 0.74 | MMM | 3M Company Earnings Call This Week | PairCorr |
| 0.64 | WMT | Walmart Financial Report 16th of May 2024 | PairCorr |
The ability to find closely correlated positions to Applied Opt could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Applied Opt 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 Applied Opt - 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 Applied Opt to buy it.
The correlation of Applied Opt 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 Applied Opt moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Applied Opt 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 Applied Opt 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 Applied Opt Fundamentals Over Time. For more detail on how to invest in Applied Stock please use our How to Invest in Applied Opt guide.You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Complementary Tools for Applied Stock analysis
When running Applied Opt's price analysis, check to measure Applied Opt'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 Applied Opt is operating at the current time. Most of Applied Opt's value examination focuses on studying past and present price action to predict the probability of Applied Opt's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Applied Opt's price. Additionally, you may evaluate how the addition of Applied Opt to your portfolios can decrease your overall portfolio volatility.
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Is Applied Opt'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 Applied Opt. If investors know Applied 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 Applied Opt listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Earnings Share (1.75) | Revenue Per Share 6.813 | Quarterly Revenue Growth (0.02) | Return On Assets (0.06) | Return On Equity (0.28) |
The market value of Applied Opt is measured differently than its book value, which is the value of Applied that is recorded on the company's balance sheet. Investors also form their own opinion of Applied Opt's value that differs from its market value or its book value, called intrinsic value, which is Applied Opt'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 Applied Opt's market value can be influenced by many factors that don't directly affect Applied Opt'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 Applied Opt's value and its price as these two are different measures arrived at by different means. Investors typically determine if Applied Opt is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Applied Opt'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.