Gilead Sciences Corporate Bonds and Leverage Analysis
| GILD Stock | USD 67.75 0.32 0.47% |
Gilead Sciences holds a debt-to-equity ratio of 1.296. At present, Gilead Sciences' Net Debt is projected to increase significantly based on the last few years of reporting. The current year's Short Term Debt is expected to grow to about 1.9 B, whereas Long Term Debt Total is forecasted to decline to about 19.7 B. Gilead Sciences' financial risk is the risk to Gilead Sciences 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
Gilead Sciences' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Gilead Sciences' 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 Gilead Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Gilead Sciences' stakeholders.
For most companies, including Gilead Sciences, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Gilead Sciences 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 3.7175 | Book Value 18.325 | Operating Margin 0.4221 | Profit Margin 0.2089 | Return On Assets 0.0978 |
Gilead |
Gilead Sciences Bond Ratings
Gilead Sciences bond ratings play a critical role in determining how much Gilead Sciences 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 Gilead Sciences' borrowing costs.| Piotroski F Score | 5 Healthy |
| Beneish M Score | -2.63 Unlikely Manipulator |
Gilead Sciences Debt to Cash Allocation
As Gilead Sciences follows its natural business cycle, the capital allocation decisions will not magically go away. Gilead Sciences' 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 24.99 B in liabilities with Debt to Equity (D/E) ratio of 1.3, which is about average as compared to similar companies. Gilead Sciences has a current ratio of 1.4, which is within standard range for the sector. Debt can assist Gilead Sciences until it has trouble settling it off, either with new capital or with free cash flow. So, Gilead Sciences' 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 Gilead Sciences sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Gilead to invest in growth at high rates of return. When we think about Gilead Sciences' use of debt, we should always consider it together with cash and equity.Gilead Sciences Total Assets Over Time
Gilead Sciences 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 Gilead Sciences' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Gilead Sciences, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Gilead Sciences debt ratio should be compared their industry average or other competing firms.Gilead Sciences Corporate Bonds Issued
Gilead Sciences 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. Gilead Sciences 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 Gilead bonds can be classified according to their maturity, which is the date when Gilead Sciences 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.
Gilead Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Gilead Sciences Use of Financial Leverage
Gilead Sciences financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Gilead Sciences'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 Gilead Sciences assets, the company is considered highly leveraged. Understanding the composition and structure of overall Gilead Sciences 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 Gilead Sciences' 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 Gilead Sciences' 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 | 25 B | 26.2 B | |
| Net Debt | 18.9 B | 19.8 B | |
| Short Term Debt | 1.8 B | 1.9 B | |
| Long Term Debt | 23.2 B | 12.2 B | |
| Long Term Debt Total | 26.4 B | 19.7 B | |
| Short and Long Term Debt | 1.8 B | 3.5 B | |
| Net Debt To EBITDA | 1.62 | 0.94 | |
| Debt To Equity | 1.10 | 1.15 | |
| Interest Debt Per Share | 20.78 | 21.82 | |
| Debt To Assets | 0.40 | 0.42 | |
| Long Term Debt To Capitalization | 0.50 | 0.53 | |
| Total Debt To Capitalization | 0.52 | 0.55 | |
| Debt Equity Ratio | 1.10 | 1.15 | |
| Debt Ratio | 0.40 | 0.42 | |
| Cash Flow To Debt Ratio | 0.32 | 0.30 |
Gilead Sciences Investors Sentiment
The influence of Gilead Sciences' 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 Gilead. 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 market does not have solid backing from leading economists and market statisticians.
Investor biases related to Gilead Sciences' public news can be used to forecast risks associated with an investment in Gilead. The trend in average sentiment can be used to explain how an investor holding Gilead can time the market purely based on public headlines and social activities around Gilead Sciences. Please note that most equities that are difficult to arbitrage are affected by market sentiment the most.
Gilead Sciences' market sentiment shows the aggregated news analyzed to detect positive and negative mentions from the text and comments. The data is normalized to provide daily scores for Gilead Sciences' and other traded tickers. The bigger the bubble, the more accurate is the estimated score. Higher bars for a given day show more participation in the average Gilead Sciences' news discussions. The higher the estimated score, the more favorable is the investor's outlook on Gilead Sciences.
Gilead Sciences Implied Volatility | 124.74 |
Gilead Sciences' implied volatility exposes the market's sentiment of Gilead Sciences stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Gilead Sciences' implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Gilead Sciences stock will not fluctuate a lot when Gilead Sciences' options are near their expiration.
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 Gilead Sciences 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, Gilead Sciences' short interest history, or implied volatility extrapolated from Gilead Sciences options trading.
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Is Gilead Sciences' 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 Gilead Sciences. If investors know Gilead 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 Gilead Sciences 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 (0.13) | Dividend Share 3 | Earnings Share 4.5 | Revenue Per Share 21.728 | Quarterly Revenue Growth (0.04) |
The market value of Gilead Sciences is measured differently than its book value, which is the value of Gilead that is recorded on the company's balance sheet. Investors also form their own opinion of Gilead Sciences' value that differs from its market value or its book value, called intrinsic value, which is Gilead Sciences' 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 Gilead Sciences' market value can be influenced by many factors that don't directly affect Gilead Sciences' 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 Gilead Sciences' value and its price as these two are different measures arrived at by different means. Investors typically determine if Gilead Sciences is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Gilead Sciences' 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.