AGFA Gevaert Current Financial Leverage
| AGFB Stock | EUR 1.18 0.04 3.51% |
AGFA Gevaert NV holds a debt-to-equity ratio of 0.1. AGFA Gevaert's financial risk is the risk to AGFA Gevaert 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 AGFA Gevaert'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 AGFA Gevaert 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 AGFA Gevaert to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, AGFA Gevaert is said to be less leveraged. If creditors hold a majority of AGFA Gevaert's assets, the Company is said to be highly leveraged.
AGFA |
AGFA Gevaert Financial Leverage Rating
AGFA Gevaert NV bond ratings play a critical role in determining how much AGFA Gevaert 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 AGFA Gevaert's borrowing costs.AGFA Gevaert NV Debt to Cash Allocation
As AGFA Gevaert NV follows its natural business cycle, the capital allocation decisions will not magically go away. AGFA Gevaert'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 accumulated (1000 K) in total debt with debt to equity ratio (D/E) of 0.1, which may suggest the company is not taking enough advantage from borrowing. AGFA Gevaert NV has a current ratio of 2.1, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist AGFA Gevaert until it has trouble settling it off, either with new capital or with free cash flow. So, AGFA Gevaert'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 AGFA Gevaert NV sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for AGFA to invest in growth at high rates of return. When we think about AGFA Gevaert's use of debt, we should always consider it together with cash and equity.AGFA Gevaert 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 AGFA Gevaert's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of AGFA Gevaert, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an AGFA Gevaert debt ratio should be compared their industry average or other competing firms.Understaning AGFA Gevaert Use of Financial Leverage
AGFA Gevaert financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures AGFA Gevaert'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 AGFA Gevaert assets, the company is considered highly leveraged. Understanding the composition and structure of overall AGFA Gevaert 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 AGFA Gevaert'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 AGFA Gevaert'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).
Agfa-Gevaert NV develops, produces, and distributes various analog and digital imaging systems, and IT solutions worldwide. Agfa-Gevaert NV was founded in 1867 and is headquartered in Mortsel, Belgium. AGFA GEVAERT operates under Specialty Industrial Machinery classification in Belgium and is traded on Brussels Stock Exchange. It employs 7108 people. Please read more on our technical analysis page.
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 AGFA Gevaert 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, AGFA Gevaert's short interest history, or implied volatility extrapolated from AGFA Gevaert options trading.
Pair Trading with AGFA Gevaert
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 AGFA Gevaert 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 AGFA Gevaert will appreciate offsetting losses from the drop in the long position's value.The ability to find closely correlated positions to AGFA Gevaert could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace AGFA Gevaert 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 AGFA Gevaert - 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 AGFA Gevaert NV to buy it.
The correlation of AGFA Gevaert 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 AGFA Gevaert moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if AGFA Gevaert NV 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 AGFA Gevaert 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 AGFA Gevaert Fundamentals Over Time. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Complementary Tools for AGFA Stock analysis
When running AGFA Gevaert's price analysis, check to measure AGFA Gevaert'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 AGFA Gevaert is operating at the current time. Most of AGFA Gevaert's value examination focuses on studying past and present price action to predict the probability of AGFA Gevaert's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move AGFA Gevaert's price. Additionally, you may evaluate how the addition of AGFA Gevaert to your portfolios can decrease your overall portfolio volatility.
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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.