Darden Restaurants Bonds
| DRI Stock | USD 159.91 3.44 2.20% |
Darden Restaurants' 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. Darden Restaurants' financial risk is the risk to Darden Restaurants 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
Darden Restaurants' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Darden Restaurants' 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 Darden Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Darden Restaurants' stakeholders.
Darden Restaurants Quarterly Debt to Equity Ratio |
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For most companies, including Darden Restaurants, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Darden Restaurants 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 8.9569 | Book Value 17.796 | Operating Margin 0.1028 | Profit Margin 0.0913 | Return On Assets 0.0724 |
Given that Darden Restaurants' 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 Darden Restaurants 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 Darden Restaurants to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Darden Restaurants is said to be less leveraged. If creditors hold a majority of Darden Restaurants' assets, the company is said to be highly leveraged.
As of now, Darden Restaurants' Long Term Debt to Equity is decreasing as compared to previous years. Darden |
Darden Restaurants Bond Ratings
Darden Restaurants bond ratings play a critical role in determining how much Darden Restaurants 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 Darden Restaurants' borrowing costs.| Piotroski F Score | 5 Healthy |
| Beneish M Score | -3.3 Unlikely Manipulator |
Darden Restaurants Debt to Cash Allocation
As Darden Restaurants follows its natural business cycle, the capital allocation decisions will not magically go away. Darden Restaurants' 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 4.55 B in debt with debt to equity (D/E) ratio of 2.89, meaning that the company heavily relies on borrowing funds for operations. Darden Restaurants has a current ratio of 0.51, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Debt can assist Darden Restaurants until it has trouble settling it off, either with new capital or with free cash flow. So, Darden Restaurants' 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 Darden Restaurants sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Darden to invest in growth at high rates of return. When we think about Darden Restaurants' use of debt, we should always consider it together with cash and equity.Darden Restaurants Inventories Over Time
Darden Restaurants Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Darden Restaurants 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.Darden Restaurants Debt Ratio | 49.67 |
Darden Restaurants Corporate Bonds Issued
Darden Restaurants 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. Darden Restaurants 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 Darden bonds can be classified according to their maturity, which is the date when Darden Restaurants 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.
Darden Restaurants Historical Liabilities
While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Darden Restaurants, understanding its historical liability is critical in projecting Darden Restaurants' 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 Darden Restaurants uses its financing power over time.
In order to fund their growth, businesses such as Darden Restaurants 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 Darden Restaurants' 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 Darden Restaurants Use of Financial Leverage
Darden Restaurants financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Darden Restaurants'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 Darden Restaurants assets, the company is considered highly leveraged. Understanding the composition and structure of overall Darden Restaurants 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 Darden Restaurants' 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 Darden Restaurants' 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 | 4.6 B | 5.3 B | |
| Debt Current | 310.5 M | 260.7 M | |
| Debt Non Current | 4.6 B | 5.1 B | |
| Issuance Repayment of Debt Securities | -19.8 M | 128.9 M | |
| Long Term Debt to Equity | 0.40 | 0.42 | |
| Debt to Equity Ratio | 3.65 | 3.64 |
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Our tools can tell you how much better you can do entering a position in Darden Restaurants without increasing your portfolio risk or giving up the expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate risk-adjusted returns of your individual positions relative to your overall portfolio.Did you try this?
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Pair Trading with Darden Restaurants
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 Darden Restaurants 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 Darden Restaurants will appreciate offsetting losses from the drop in the long position's value.Moving together with Darden Stock
| + | 0.62 | WING | Wingstop | Fiscal Quarter End 31st of December 2023 | PairCorr | |
| + | 0.89 | CMG | Chipotle Mexican Grill | Fiscal Quarter End 31st of December 2023 | PairCorr |
Moving against Darden Stock
| - | 0.78 | BTBD | Bt Brands | Fiscal Quarter End 31st of December 2023 | PairCorr | |
| - | 0.64 | YUMC | Yum China Holdings | Fiscal Quarter End 31st of December 2023 | PairCorr |
The ability to find closely correlated positions to Darden Restaurants could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Darden Restaurants 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 Darden Restaurants - 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 Darden Restaurants to buy it.
The correlation of Darden Restaurants 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 Darden Restaurants moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants Fundamentals Over Time. For more detail on how to invest in Darden Stock please use our How to Invest in Darden Restaurants guide.You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Complementary Tools for Darden Stock analysis
When running Darden Restaurants' price analysis, check to measure Darden Restaurants' 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 Darden Restaurants is operating at the current time. Most of Darden Restaurants' value examination focuses on studying past and present price action to predict the probability of Darden Restaurants' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Darden Restaurants' price. Additionally, you may evaluate how the addition of Darden Restaurants to your portfolios can decrease your overall portfolio volatility.
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Is Darden Restaurants' 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 Darden Restaurants. If investors know Darden 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 Darden Restaurants 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 0.027 | Dividend Share 4.94 | Earnings Share 8.04 | Revenue Per Share 88.734 | Quarterly Revenue Growth 0.116 |
The market value of Darden Restaurants is measured differently than its book value, which is the value of Darden that is recorded on the company's balance sheet. Investors also form their own opinion of Darden Restaurants' value that differs from its market value or its book value, called intrinsic value, which is Darden Restaurants' 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 Darden Restaurants' market value can be influenced by many factors that don't directly affect Darden Restaurants' 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 Darden Restaurants' value and its price as these two are different measures arrived at by different means. Investors typically determine if Darden Restaurants is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Darden Restaurants' 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.