Halliburton Bonds
| HAL Stock | USD 40.76 0.53 1.28% |
Halliburton's 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. Halliburton's financial risk is the risk to Halliburton 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).
Halliburton Current Financial Burden
Halliburton'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. Halliburton'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 Halliburton Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Halliburton's stakeholders.
Asset vs Debt
Equity vs Debt
For most companies, including Halliburton, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Halliburton 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 4.355 | Other Assets 4.2 B | Total Assets 23.3 B | Operating Margin 0.1832 | Profit Margin 0.1098 |
Given that Halliburton's 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 Halliburton 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 Halliburton to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Halliburton is said to be less leveraged. If creditors hold a majority of Halliburton's assets, the company is said to be highly leveraged.
Halliburton Total Debt is quite stable at the moment as compared to the past year. The company's current value of Total Debt is estimated at 10.54 Billion. Debt Current is expected to rise to about 333.8 M this year, although the value of Issuance Repayment of Debt Securities will most likely fall to (1.3 B). Halliburton Quarterly Debt to Equity Ratio |
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Halliburton |
Halliburton Bond Ratings
Halliburton bond ratings play a critical role in determining how much Halliburton 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 Halliburton's borrowing costs.| Piotroski F Score | 5 Healthy |
| Beneish M Score | -2.88 Unlikely Manipulator |
Halliburton Debt to Cash Allocation
As Halliburton follows its natural business cycle, the capital allocation decisions will not magically go away. Halliburton'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.
The company has 8.94 B in debt with debt to equity (D/E) ratio of 1.17, which is OK given its current industry classification. Halliburton has a current ratio of 2.06, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist Halliburton until it has trouble settling it off, either with new capital or with free cash flow. So, Halliburton's 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 Halliburton sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Halliburton to invest in growth at high rates of return. When we think about Halliburton's use of debt, we should always consider it together with cash and equity.Halliburton Inventories Over Time
Halliburton Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Halliburton 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.Halliburton Debt Ratio | 44.74 |
Halliburton Corporate Bonds Issued
Halliburton 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. Halliburton 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 Halliburton bonds can be classified according to their maturity, which is the date when Halliburton 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.
Halliburton Historical Liabilities
While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Halliburton, understanding its historical liability is critical in projecting Halliburton's 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 Halliburton uses its financing power over time.
In order to fund their growth, businesses such as Halliburton 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 Halliburton's 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 Halliburton Use of Financial Leverage
Halliburton financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Halliburton'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 Halliburton assets, the company is considered highly leveraged. Understanding the composition and structure of overall Halliburton 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 Halliburton'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 Halliburton'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 2023 | ||
| Total Debt | 8.9 B | 10.5 B | |
| Debt Current | 224 M | 333.8 M | |
| Debt Non Current | 8.7 B | 10.3 B | |
| Issuance Repayment of Debt Securities | -1.2 B | -1.3 B | |
| Long Term Debt to Equity | 1.00 | 0.92 | |
| Debt to Equity Ratio | 1.92 | 2.04 |
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Check out the analysis of Halliburton Fundamentals Over Time. For more information on how to buy Halliburton Stock please use our How to buy in Halliburton Stock guide. Note that the Halliburton information on this page should be used as a complementary analysis to other Halliburton's 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 the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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Is Halliburton's 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 Halliburton. If investors know Halliburton 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 Halliburton 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 4.642 | Dividend Share 0.56 | Earnings Share 2.71 | Revenue Per Share 24.794 | Quarterly Revenue Growth 0.143 |
The market value of Halliburton is measured differently than its book value, which is the value of Halliburton that is recorded on the company's balance sheet. Investors also form their own opinion of Halliburton's value that differs from its market value or its book value, called intrinsic value, which is Halliburton'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 Halliburton's market value can be influenced by many factors that don't directly affect Halliburton'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 Halliburton's value and its price as these two are different measures arrived at by different means. Investors typically determine if Halliburton is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Halliburton'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.