Western Midstream Corporate Bonds and Leverage Analysis
| WES Stock | USD 34.24 0.30 0.87% |
Western Midstream holds a debt-to-equity ratio of 2.338. At this time, Western Midstream's Cash Flow To Debt Ratio is comparatively stable compared to the past year. Western Midstream's financial risk is the risk to Western Midstream 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
Western Midstream'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. Western Midstream'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 Western Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Western Midstream's stakeholders.
For most companies, including Western Midstream, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Western Midstream Partners 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 4.5357 | Book Value 7.626 | Operating Margin 0.4221 | Profit Margin 0.3214 | Return On Assets 0.0679 |
Western |
Given the importance of Western Midstream's capital structure, the first step in the capital decision process is for the management of Western Midstream to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Western Midstream Partners to issue bonds at a reasonable cost.
Western Midstream Financial Leverage Rating
Western Midstream Partners bond ratings play a critical role in determining how much Western Midstream 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 Western Midstream's borrowing costs.| Piotroski F Score | 6 Healthy |
| Beneish M Score | -5.15 Unlikely Manipulator |
Western Midstream Debt to Cash Allocation
As Western Midstream Partners follows its natural business cycle, the capital allocation decisions will not magically go away. Western Midstream'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 7.96 B in debt with debt to equity (D/E) ratio of 2.34, meaning that the company heavily relies on borrowing funds for operations. Western Midstream has a current ratio of 1.18, demonstrating that it may not have the ability to pay its financial commitments when the payables are due. Debt can assist Western Midstream until it has trouble settling it off, either with new capital or with free cash flow. So, Western Midstream'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 Western Midstream sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Western to invest in growth at high rates of return. When we think about Western Midstream's use of debt, we should always consider it together with cash and equity.Western Midstream Total Assets Over Time
Western Midstream 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 Western Midstream's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Western Midstream, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Western Midstream debt ratio should be compared their industry average or other competing firms.Western Net Debt
Net Debt |
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Understaning Western Midstream Use of Financial Leverage
Western Midstream financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Western Midstream'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 Western Midstream assets, the company is considered highly leveraged. Understanding the composition and structure of overall Western Midstream 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 Western Midstream'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 Western Midstream'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 Next Year | ||
| Net Debt | 7.7 B | 8.1 B | |
| Long Term Debt | 7.3 B | 3.9 B | |
| Short and Long Term Debt Total | 8 B | 4.4 B | |
| Long Term Debt Total | 7.6 B | 5.4 B | |
| Short and Long Term Debt | 610.3 M | 1.2 B | |
| Short Term Debt | 629 M | 885.9 M | |
| Net Debt To EBITDA | 4.07 | 2.15 | |
| Debt To Equity | 2.72 | 2.86 | |
| Interest Debt Per Share | 21.53 | 22.60 | |
| Debt To Assets | 0.63 | 0.36 | |
| Long Term Debt To Capitalization | 0.71 | 0.95 | |
| Total Debt To Capitalization | 0.73 | 0.95 | |
| Debt Equity Ratio | 2.72 | 2.86 | |
| Debt Ratio | 0.63 | 0.36 | |
| Cash Flow To Debt Ratio | 0.22 | 0.31 |
Western Midstream Investors Sentiment
The influence of Western Midstream's 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 Western. 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 Western Midstream's public news can be used to forecast risks associated with an investment in Western. The trend in average sentiment can be used to explain how an investor holding Western can time the market purely based on public headlines and social activities around Western Midstream Partners. Please note that most equities that are difficult to arbitrage are affected by market sentiment the most.
Western Midstream's 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 Western Midstream's 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 Western Midstream's news discussions. The higher the estimated score, the more favorable is the investor's outlook on Western Midstream.
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 Western Midstream 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, Western Midstream's short interest history, or implied volatility extrapolated from Western Midstream options trading.
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Check out the analysis of Western Midstream Fundamentals Over Time. Note that the Western Midstream information on this page should be used as a complementary analysis to other Western Midstream'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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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When running Western Midstream's price analysis, check to measure Western Midstream's 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 Western Midstream is operating at the current time. Most of Western Midstream's value examination focuses on studying past and present price action to predict the probability of Western Midstream's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Western Midstream's price. Additionally, you may evaluate how the addition of Western Midstream to your portfolios can decrease your overall portfolio volatility.
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Is Western Midstream'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 Western Midstream. If investors know Western 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 Western Midstream 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 2.213 | Earnings Share 2.6 | Revenue Per Share 8.11 | Quarterly Revenue Growth 0.101 |
The market value of Western Midstream is measured differently than its book value, which is the value of Western that is recorded on the company's balance sheet. Investors also form their own opinion of Western Midstream's value that differs from its market value or its book value, called intrinsic value, which is Western Midstream'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 Western Midstream's market value can be influenced by many factors that don't directly affect Western Midstream'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 Western Midstream's value and its price as these two are different measures arrived at by different means. Investors typically determine if Western Midstream is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Western Midstream'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.