Liquidity Services Current Financial Leverage

LQDT Stock  USD 18.38  0.14  0.77%   
Liquidity Services holds a debt-to-equity ratio of 0.109. At this time, Liquidity Services' Short and Long Term Debt is comparatively stable compared to the past year. Long Term Debt To Capitalization is likely to gain to 0.08 in 2024, whereas Short Term Debt is likely to drop slightly above 4.5 M in 2024. Liquidity Services' financial risk is the risk to Liquidity Services 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

Liquidity Services' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Liquidity Services' 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 Liquidity Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Liquidity Services' stakeholders.
For most companies, including Liquidity Services, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Liquidity Services 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
3.4141
Book Value
5.389
Operating Margin
0.0294
Profit Margin
0.0603
Return On Assets
0.0539
At this time, Liquidity Services' Short and Long Term Debt is comparatively stable compared to the past year. Long Term Debt To Capitalization is likely to gain to 0.08 in 2024, whereas Short Term Debt is likely to drop slightly above 4.5 M in 2024.
  
Check out the analysis of Liquidity Services Fundamentals Over Time.
For more information on how to buy Liquidity Stock please use our How to Invest in Liquidity Services guide.

Liquidity Services Financial Leverage Rating

Liquidity Services bond ratings play a critical role in determining how much Liquidity Services 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 Liquidity Services' borrowing costs.

Liquidity Services Debt to Cash Allocation

As Liquidity Services follows its natural business cycle, the capital allocation decisions will not magically go away. Liquidity Services' 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 10.68 M in liabilities with Debt to Equity (D/E) ratio of 0.11, which may suggest the company is not taking enough advantage from borrowing. Liquidity Services has a current ratio of 0.93, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Debt can assist Liquidity Services until it has trouble settling it off, either with new capital or with free cash flow. So, Liquidity Services' 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 Liquidity Services sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Liquidity to invest in growth at high rates of return. When we think about Liquidity Services' use of debt, we should always consider it together with cash and equity.

Liquidity Services Total Assets Over Time

Liquidity Services 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 Liquidity Services' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Liquidity Services, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Liquidity Services debt ratio should be compared their industry average or other competing firms.

Liquidity Short Long Term Debt Total

Short Long Term Debt Total

9.96 Million

At this time, Liquidity Services' Short and Long Term Debt Total is comparatively stable compared to the past year.

Understaning Liquidity Services Use of Financial Leverage

Liquidity Services financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Liquidity Services'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 Liquidity Services assets, the company is considered highly leveraged. Understanding the composition and structure of overall Liquidity Services 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 Liquidity Services' 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 Liquidity Services' 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 ReportedProjected for 2024
Short and Long Term Debt Total12.3 M10 M
Net Debt-89.6 M-94.1 M
Long Term Debt 0.00  0.00 
Short Term Debt4.7 M4.5 M
Long Term Debt Total28.8 M25.6 M
Short and Long Term Debt21.9 M26.4 M
Long Term Debt To Capitalization 0.04  0.08 
Total Debt To Capitalization 0.07  0.10 
Debt Equity Ratio 0.08  0.12 
Debt Ratio 0.04  0.06 
Cash Flow To Debt Ratio 5.06  4.81 
Please read more on our technical analysis page.
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 Liquidity Services 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, Liquidity Services' short interest history, or implied volatility extrapolated from Liquidity Services options trading.

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When determining whether Liquidity Services is a good investment, qualitative aspects like company management, corporate governance, and ethical practices play a significant role. A comparison with peer companies also provides context and helps to understand if Liquidity Stock is undervalued or overvalued. This multi-faceted approach, blending both quantitative and qualitative analysis, forms a solid foundation for making an informed investment decision about Liquidity Services Stock. Highlighted below are key reports to facilitate an investment decision about Liquidity Services Stock:
Check out the analysis of Liquidity Services Fundamentals Over Time.
For more information on how to buy Liquidity Stock please use our How to Invest in Liquidity Services guide.
Note that the Liquidity Services information on this page should be used as a complementary analysis to other Liquidity Services' 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Complementary Tools for Liquidity Stock analysis

When running Liquidity Services' price analysis, check to measure Liquidity Services' 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 Liquidity Services is operating at the current time. Most of Liquidity Services' value examination focuses on studying past and present price action to predict the probability of Liquidity Services' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Liquidity Services' price. Additionally, you may evaluate how the addition of Liquidity Services to your portfolios can decrease your overall portfolio volatility.
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Is Liquidity Services' 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 Liquidity Services. If investors know Liquidity 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 Liquidity Services 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
(0.50)
Earnings Share
0.59
Revenue Per Share
10.188
Quarterly Revenue Growth
(0.01)
Return On Assets
0.0539
The market value of Liquidity Services is measured differently than its book value, which is the value of Liquidity that is recorded on the company's balance sheet. Investors also form their own opinion of Liquidity Services' value that differs from its market value or its book value, called intrinsic value, which is Liquidity Services' 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 Liquidity Services' market value can be influenced by many factors that don't directly affect Liquidity Services' 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 Liquidity Services' value and its price as these two are different measures arrived at by different means. Investors typically determine if Liquidity Services is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Liquidity Services' 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.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.