Evelo Biosciences Current Financial Leverage
| EVLODelisted Stock | USD 0.09 0.17 66.00% |
Evelo Biosciences holds a debt-to-equity ratio of 1.552. Evelo Biosciences' financial risk is the risk to Evelo Biosciences 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
Evelo Biosciences' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Evelo Biosciences' 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 Evelo Pink Sheet's retail investors understand whether an upcoming fall or rise in the market will negatively affect Evelo Biosciences' stakeholders.
For most companies, including Evelo Biosciences, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Evelo Biosciences 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.
Given that Evelo Biosciences' 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 Evelo Biosciences 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 Evelo Biosciences to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Evelo Biosciences is said to be less leveraged. If creditors hold a majority of Evelo Biosciences' assets, the Company is said to be highly leveraged.
Evelo |
Evelo Biosciences Financial Leverage Rating
Evelo Biosciences bond ratings play a critical role in determining how much Evelo Biosciences 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 Evelo Biosciences' borrowing costs.Evelo Biosciences Debt to Cash Allocation
As Evelo Biosciences follows its natural business cycle, the capital allocation decisions will not magically go away. Evelo Biosciences' 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 currently holds 51.14 M in liabilities with Debt to Equity (D/E) ratio of 1.55, which is about average as compared to similar companies. Evelo Biosciences has a current ratio of 4.44, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist Evelo Biosciences until it has trouble settling it off, either with new capital or with free cash flow. So, Evelo Biosciences' 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 Evelo Biosciences sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Evelo to invest in growth at high rates of return. When we think about Evelo Biosciences' use of debt, we should always consider it together with cash and equity.Evelo Biosciences 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 Evelo Biosciences' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Evelo Biosciences, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an Evelo Biosciences debt ratio should be compared their industry average or other competing firms.Understaning Evelo Biosciences Use of Financial Leverage
Evelo Biosciences financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Evelo Biosciences'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 Evelo Biosciences assets, the company is considered highly leveraged. Understanding the composition and structure of overall Evelo Biosciences 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 Evelo Biosciences' 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 Evelo Biosciences' 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).
Evelo Biosciences, Inc., a biotechnology company, discovers and develops oral biologics for the treatment of inflammatory diseases and cancer. Evelo Biosciences, Inc. was incorporated in 2014 and is headquartered in Cambridge, Massachusetts. Evelo Biosciences operates under Biotechnology classification in the United States and is traded on NASDAQ Exchange. It employs 122 people. Please read more on our technical analysis page.
Pair Trading with Evelo Biosciences
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 Evelo Biosciences 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 Evelo Biosciences will appreciate offsetting losses from the drop in the long position's value.Moving together with Evelo Pink Sheet
| 0.93 | KA | Kineta Inc Financial Report 9th of May 2024 | PairCorr |
Moving against Evelo Pink Sheet
| 0.79 | DNTH | Dianthus Therapeutics Symbol Change | PairCorr |
| 0.74 | YS | YS Biopharma | PairCorr |
| 0.72 | VANI | Vivani Medical | PairCorr |
| 0.67 | EQ | Equillium Financial Report 9th of May 2024 | PairCorr |
| 0.66 | VERA | Vera Therapeutics Financial Report 9th of May 2024 | PairCorr |
The ability to find closely correlated positions to Evelo Biosciences could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Evelo Biosciences 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 Evelo Biosciences - 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 Evelo Biosciences to buy it.
The correlation of Evelo Biosciences 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 Evelo Biosciences moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Evelo Biosciences 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 Evelo Biosciences 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 Investing Opportunities to better understand how to build diversified portfolios. Also, note that the market value of any company could be tightly coupled with the direction of predictive economic indicators such as signals in bureau of economic analysis. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Consideration for investing in Evelo Pink Sheet
If you are still planning to invest in Evelo Biosciences check if it may still be traded through OTC markets such as Pink Sheets or OTC Bulletin Board. You may also purchase it directly from the company, but this is not always possible and may require contacting the company directly. Please note that delisted stocks are often considered to be more risky investments, as they are no longer subject to the same regulatory and reporting requirements as listed stocks. Therefore, it is essential to carefully research the Evelo Biosciences' history and understand the potential risks before investing.
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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.