Dermata Therapeutics Current Financial Leverage

DRMA -  USA Stock  

USD 1.75  0.24  12.06%

Dermata Therapeutics' 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. Dermata Therapeutics' financial risk is the risk to Dermata Therapeutics 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).
Continue to the analysis of Dermata Therapeutics Fundamentals Over Time.

Dermata Bonds 

 
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The current year Issuance Repayment of Debt Securities is expected to grow to about 2.9 M, whereas Total Debt is forecasted to decline to about 3.5 M.
Given that Dermata Therapeutics' 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 Dermata Therapeutics 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 Dermata Therapeutics to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Dermata Therapeutics is said to be less leveraged. If creditors hold a majority of Dermata Therapeutics' assets, the company is said to be highly leveraged.

Dermata Therapeutics Quarterly Debt to Equity Ratio

0.096Share
Given the importance of Dermata Therapeutics' capital structure, the first step in the capital decision process is for the management of Dermata Therapeutics 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 Dermata Therapeutics to issue bonds at a reasonable cost.

Dermata Therapeutics Financial Leverage Rating

Dermata Therapeutics bond ratings play a critical role in determining how much Dermata Therapeutics 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 Dermata Therapeutics' borrowing costs.
Overall Bond Rating
Not Rated
Average S&P Rating
N/A
Piotroski F Score
3  Frail
Beneish M Score

Dermata Therapeutics Total Assets Over Time

Dermata Therapeutics Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Dermata Therapeutics 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.

Dermata Therapeutics Debt Ratio

    
  417.35   
It appears most of the Dermata Therapeutics' assets are financed through 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 Dermata Therapeutics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Dermata Therapeutics, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Dermata Therapeutics debt ratio should be compared their industry average or other competing firms.
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Dermata Therapeutics Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Dermata Therapeutics, understanding its historical liability is critical in projecting Dermata Therapeutics' 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 Dermata Therapeutics uses its financing power over time.
In order to fund their growth, businesses such as Dermata Therapeutics 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 Dermata Therapeutics' 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 Dermata Therapeutics Use of Financial Leverage

Dermata Therapeutics financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Dermata Therapeutics'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 Dermata Therapeutics assets, the company is considered highly leveraged. Understanding the composition and structure of overall Dermata Therapeutics 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.
Last ReportedProjected for 2022
Total Debt4.1 M3.5 M
Debt Current4.1 M3.4 M
Debt Non Current497.9 K495 K
Issuance Repayment of Debt Securities2.6 M2.9 M
Debt to Equity Ratio(1.37) (1.48) 
Dermata Therapeutics, Inc., a clinical-stage biotechnology company, focuses on the treatment of medical and aesthetic skin conditions. The company was founded in 2014 and is headquartered in San Diego, California. Dermata Therapeutics operates under Biotechnology classification in the United States and is traded on NASDAQ Exchange. It employs 7 people.
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Dermata Therapeutics Investors Sentiment

The influence of Dermata Therapeutics' investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in Dermata. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock markets does not have a solid backing from leading economists and market statisticians.
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 Dermata Therapeutics 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, Dermata Therapeutics' short interest history, or implied volatility extrapolated from Dermata Therapeutics options trading.

Current Sentiment - DRMA

Dermata Therapeutics Investor Sentiment

Macroaxis portfolio users are insensible in their opinion about investing in Dermata Therapeutics. What is your opinion about investing in Dermata Therapeutics? Are you bullish or bearish?
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Pair Trading with Dermata Therapeutics

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 Dermata Therapeutics 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 Dermata Therapeutics will appreciate offsetting losses from the drop in the long position's value.

Dermata Therapeutics Pair Correlation

Equities Pair Trading Analysis

Correlation analysis and pair trading evaluation for Dermata Therapeutics and Biocardia. Pair trading can be used as a hedging technique within a particular sector or industry or even over random equities to generate better risk-adjusted return
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Continue to the analysis of Dermata Therapeutics Fundamentals Over Time. Note that the Dermata Therapeutics information on this page should be used as a complementary analysis to other Dermata Therapeutics' 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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When running Dermata Therapeutics price analysis, check to measure Dermata Therapeutics' 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 Dermata Therapeutics is operating at the current time. Most of Dermata Therapeutics' value examination focuses on studying past and present price action to predict the probability of Dermata Therapeutics' future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Dermata Therapeutics' price. Additionally, you may evaluate how the addition of Dermata Therapeutics to your portfolios can decrease your overall portfolio volatility.
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Is Dermata Therapeutics' 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 Dermata Therapeutics. If investors know Dermata 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 Dermata Therapeutics listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Dermata Therapeutics is measured differently than its book value, which is the value of Dermata that is recorded on the company's balance sheet. Investors also form their own opinion of Dermata Therapeutics' value that differs from its market value or its book value, called intrinsic value, which is Dermata Therapeutics' 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 Dermata Therapeutics' market value can be influenced by many factors that don't directly affect Dermata Therapeutics' 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 Dermata Therapeutics' value and its price as these two are different measures arrived at by different means. Investors typically determine Dermata Therapeutics value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Dermata Therapeutics' 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.
  • 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.