Danaos Current Financial Leverage
| DAC Stock | USD 65.34 0.57 0.86% |
Danaos' 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. Danaos' financial risk is the risk to Danaos 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).
Danaos Current Financial Burden
Danaos' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Danaos' 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 Danaos Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Danaos' stakeholders.
Asset vs Debt
Equity vs Debt
For most companies, including Danaos, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Danaos 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 0.448 | Other Assets 306.2 M | Total Assets 3.4 B | Operating Margin 0.6135 | Profit Margin 0.514 |
Given that Danaos' 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 Danaos 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 Danaos to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Danaos is said to be less leveraged. If creditors hold a majority of Danaos' assets, the company is said to be highly leveraged.
Danaos Debt Current is projected to decrease significantly based on the last few years of reporting. The past year's Debt Current was at 54.97 Million. The current year's Debt Non Current is expected to grow to about 458.7 M, whereas Issuance Repayment of Debt Securities is forecasted to decline to (886.5 M). Danaos Quarterly Debt to Equity Ratio |
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Danaos |
Danaos Financial Leverage Rating
Danaos bond ratings play a critical role in determining how much Danaos 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 Danaos' borrowing costs.| Piotroski F Score | 6 Healthy |
| Beneish M Score | -3.21 Unlikely Manipulator |
Danaos Debt to Cash Allocation
As Danaos follows its natural business cycle, the capital allocation decisions will not magically go away. Danaos' 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 501.95 M in debt with debt to equity (D/E) ratio of 0.41, which is OK given its current industry classification. Danaos has a current ratio of 2.05, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist Danaos until it has trouble settling it off, either with new capital or with free cash flow. So, Danaos' 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 Danaos sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Danaos to invest in growth at high rates of return. When we think about Danaos' use of debt, we should always consider it together with cash and equity.Danaos Total Assets Over Time
Danaos Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Danaos uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.Danaos Debt Ratio | 16.07 |
Danaos Historical Liabilities
While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Danaos, understanding its historical liability is critical in projecting Danaos' future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Danaos uses its financing power over time.
In order to fund their growth, businesses such as Danaos widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up Danaos' capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, 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.
Understaning Danaos Use of Financial Leverage
Danaos financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Danaos'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 Danaos assets, the company is considered highly leveraged. Understanding the composition and structure of overall Danaos 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 Danaos' 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 Danaos' 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 2023 | ||
| Total Debt | 502 M | 515.2 M | |
| Debt Current | 55 M | 56.4 M | |
| Debt Non Current | 447 M | 458.7 M | |
| Issuance Repayment of Debt Securities | -863.7 M | -886.5 M | |
| Debt to Equity Ratio | 0.33 | 0.34 |
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 Danaos 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, Danaos' short interest history, or implied volatility extrapolated from Danaos options trading.
Pair Trading with Danaos
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 Danaos 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 Danaos will appreciate offsetting losses from the drop in the long position's value.Moving together with Danaos Stock
| + | 0.71 | SB | Safe Bulkers | Report 8th of November 2023 | PairCorr | |
| + | 0.64 | EGLE | Eagle Bulk Shipping | Report 2nd of November 2023 | PairCorr |
The ability to find closely correlated positions to Danaos could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Danaos 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 Danaos - 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 Danaos to buy it.
The correlation of Danaos is a statistical measure of how it moves in relation to other equities. 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 Danaos moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Danaos 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 Danaos 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 Danaos Fundamentals Over Time. For information on how to trade Danaos Stock refer to our How to Trade Danaos Stock guide. Note that the Danaos information on this page should be used as a complementary analysis to other Danaos' 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 the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Complementary Tools for Danaos Stock analysis
When running Danaos' price analysis, check to measure Danaos' 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 Danaos is operating at the current time. Most of Danaos' value examination focuses on studying past and present price action to predict the probability of Danaos' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Danaos' price. Additionally, you may evaluate how the addition of Danaos to your portfolios can decrease your overall portfolio volatility.
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Is Danaos' 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 Danaos. If investors know Danaos 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 Danaos 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 17.415 | Dividend Share 3 | Earnings Share 25.39 | Revenue Per Share 49.281 | Quarterly Revenue Growth (0.038) |
The market value of Danaos is measured differently than its book value, which is the value of Danaos that is recorded on the company's balance sheet. Investors also form their own opinion of Danaos' value that differs from its market value or its book value, called intrinsic value, which is Danaos' 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 Danaos' market value can be influenced by many factors that don't directly affect Danaos' 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 Danaos' value and its price as these two are different measures arrived at by different means. Investors typically determine if Danaos is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Danaos' 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.