Extreme Networks Current Financial Leverage
| EXTR Stock | USD 10.94 0.19 1.71% |
Extreme Networks has over 264.61 Million in debt which may indicate that it relies heavily on debt financing. At this time, Extreme Networks' Debt To Equity is relatively stable compared to the past year. As of 04/18/2024, Interest Debt Per Share is likely to grow to 2.06, while Net Debt is likely to drop slightly above 29.5 M. Extreme Networks' financial risk is the risk to Extreme Networks 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
Extreme Networks' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Extreme Networks' 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 Extreme Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Extreme Networks' stakeholders.
For most companies, including Extreme Networks, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Extreme Networks 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 12.7203 | Book Value 0.841 | Operating Margin 0.0658 | Profit Margin 0.0596 | Return On Assets 0.0723 |
Extreme |
Extreme Networks Financial Leverage Rating
Extreme Networks bond ratings play a critical role in determining how much Extreme Networks 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 Extreme Networks' borrowing costs.| Piotroski F Score | 7 Strong |
| Beneish M Score | -2.83 Unlikely Manipulator |
Extreme Networks Debt to Cash Allocation
As Extreme Networks follows its natural business cycle, the capital allocation decisions will not magically go away. Extreme Networks' 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 264.61 M in liabilities with Debt to Equity (D/E) ratio of 3.89, implying the company greatly relies on financing operations through barrowing. Extreme Networks has a current ratio of 0.96, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Debt can assist Extreme Networks until it has trouble settling it off, either with new capital or with free cash flow. So, Extreme Networks' 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 Extreme Networks sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Extreme to invest in growth at high rates of return. When we think about Extreme Networks' use of debt, we should always consider it together with cash and equity.Extreme Networks Total Assets Over Time
Extreme Networks 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 Extreme Networks' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Extreme Networks, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a an Extreme Networks debt ratio should be compared their industry average or other competing firms.Extreme Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Extreme Networks Use of Financial Leverage
Extreme Networks financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Extreme Networks'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 Extreme Networks assets, the company is considered highly leveraged. Understanding the composition and structure of overall Extreme Networks 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 Extreme Networks' 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 Extreme Networks' 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 | ||
| Short and Long Term Debt Total | 304.3 M | 187.4 M | |
| Net Debt | 34.3 M | 29.5 M | |
| Short Term Debt | 40.7 M | 26.1 M | |
| Long Term Debt | 215.7 M | 178.2 M | |
| Long Term Debt Total | 215.7 M | 170.9 M | |
| Short and Long Term Debt | 30.9 M | 23.1 M | |
| Net Debt To EBITDA | 0.23 | 0.22 | |
| Debt To Equity | 2.04 | 3.52 | |
| Interest Debt Per Share | 1.96 | 2.06 | |
| Debt To Assets | 0.21 | 0.17 | |
| Long Term Debt To Capitalization | 0.59 | 0.33 | |
| Total Debt To Capitalization | 0.62 | 0.66 | |
| Debt Equity Ratio | 2.04 | 3.52 | |
| Debt Ratio | 0.21 | 0.17 | |
| Cash Flow To Debt Ratio | 0.85 | 0.89 |
Pair Trading with Extreme Networks
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 Extreme Networks 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 Extreme Networks will appreciate offsetting losses from the drop in the long position's value.Moving together with Extreme Stock
| 0.76 | CSCO | Cisco Systems Fiscal Quarter End 30th of April 2024 | PairCorr |
| 0.63 | G | Genpact Limited Sell-off Trend | PairCorr |
Moving against Extreme Stock
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| 0.81 | FORTY | Formula Systems 1985 | PairCorr |
| 0.79 | NVMI | Nova Financial Report 9th of May 2024 | PairCorr |
The ability to find closely correlated positions to Extreme Networks could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Extreme Networks 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 Extreme Networks - 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 Extreme Networks to buy it.
The correlation of Extreme Networks 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 Extreme Networks moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Extreme Networks 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 Extreme Networks 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 Extreme Networks Fundamentals Over Time. To learn how to invest in Extreme Stock, please use our How to Invest in Extreme Networks guide.You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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When running Extreme Networks' price analysis, check to measure Extreme Networks' 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 Extreme Networks is operating at the current time. Most of Extreme Networks' value examination focuses on studying past and present price action to predict the probability of Extreme Networks' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Extreme Networks' price. Additionally, you may evaluate how the addition of Extreme Networks to your portfolios can decrease your overall portfolio volatility.
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Is Extreme Networks' 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 Extreme Networks. If investors know Extreme 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 Extreme Networks 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 (0.77) | Earnings Share 0.6 | Revenue Per Share 10.456 | Quarterly Revenue Growth (0.07) | Return On Assets 0.0723 |
The market value of Extreme Networks is measured differently than its book value, which is the value of Extreme that is recorded on the company's balance sheet. Investors also form their own opinion of Extreme Networks' value that differs from its market value or its book value, called intrinsic value, which is Extreme Networks' 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 Extreme Networks' market value can be influenced by many factors that don't directly affect Extreme Networks' 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 Extreme Networks' value and its price as these two are different measures arrived at by different means. Investors typically determine if Extreme Networks is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Extreme Networks' 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.