Epsilon Energy Current Debt
| EPSN Stock | USD 5.30 0.01 0.19% |
Epsilon Energy holds a debt-to-equity ratio of 0.42. As of the 5th of June 2024, Net Debt is likely to grow to about (12.2 M). In addition to that, Short and Long Term Debt Total is likely to drop to about 535.2 K With a high degree of financial leverage come high-interest payments, which usually reduce Epsilon Energy's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Epsilon Energy'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. Epsilon Energy'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 Epsilon Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Epsilon Energy's stakeholders.
For most companies, including Epsilon Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Epsilon Energy 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 1.1766 | Book Value 4.557 | Operating Margin 0.1633 | Profit Margin 0.1677 | Return On Assets 0.0346 |
Epsilon |
Epsilon Energy Financial Leverage Rating
Epsilon Energy bond ratings play a critical role in determining how much Epsilon Energy 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 Epsilon Energy's borrowing costs.Epsilon Energy Debt to Cash Allocation
As Epsilon Energy follows its natural business cycle, the capital allocation decisions will not magically go away. Epsilon Energy'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.
Epsilon Energy currently holds 563.38 K in liabilities with Debt to Equity (D/E) ratio of 0.42, which is about average as compared to similar companies. Epsilon Energy has a current ratio of 4.69, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Epsilon Energy's use of debt, we should always consider it together with its cash and equity.Epsilon Energy Total Assets Over Time
Epsilon Energy 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 Epsilon Energy's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Epsilon Energy, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an Epsilon Energy debt ratio should be compared their industry average or other competing firms.Epsilon Net Debt
Understaning Epsilon Energy Use of Financial Leverage
Epsilon Energy financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Epsilon Energy'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 Epsilon Energy assets, the company is considered highly leveraged. Understanding the composition and structure of overall Epsilon Energy 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 Epsilon Energy'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 Epsilon Energy'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 | ||
| Net Debt | -12.8 M | -12.2 M | |
| Short and Long Term Debt Total | 563.4 K | 535.2 K | |
| Short Term Debt | 86.5 K | 82.1 K | |
| Net Debt To EBITDA | (1.14) | (1.08) | |
| Debt To Equity | 0.01 | 0.01 | |
| Interest Debt Per Share | 0.03 | 0.03 | |
| Debt To Assets | 0 | 0 | |
| Long Term Debt To Capitalization | 0.01 | 0.01 | |
| Total Debt To Capitalization | 0.01 | 0.01 | |
| Debt Equity Ratio | 0.01 | 0.01 | |
| Debt Ratio | 0 | 0 | |
| Cash Flow To Debt Ratio | 32.04 | 30.43 |
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When determining whether Epsilon Energy offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Epsilon Energy's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Epsilon Energy Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Epsilon Energy Stock:Check out the analysis of Epsilon Energy Fundamentals Over Time. To learn how to invest in Epsilon Stock, please use our How to Invest in Epsilon Energy guide.You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Is Oil & Gas Exploration & Production space 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 Epsilon Energy. If investors know Epsilon 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 Epsilon Energy 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 (0.54) | Dividend Share 0.25 | Earnings Share 0.23 | Revenue Per Share 1.32 | Quarterly Revenue Growth (0.15) |
The market value of Epsilon Energy is measured differently than its book value, which is the value of Epsilon that is recorded on the company's balance sheet. Investors also form their own opinion of Epsilon Energy's value that differs from its market value or its book value, called intrinsic value, which is Epsilon Energy'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 Epsilon Energy's market value can be influenced by many factors that don't directly affect Epsilon Energy'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 Epsilon Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if Epsilon Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Epsilon Energy'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.