Continue to hold Assured (USA Stocks:AGO) based on its current debt obligations?

AGO Stock

USD 46.92 0.70 1.51%

Macroaxis Story

Assured Guaranty is scheduled to announce its earnings today. Assured Guaranty Price to Book Value is very stable at the moment as compared to the past year. Assured Guaranty reported last year Price to Book Value of 0.49. As of 28th of February 2023, Return on Average Assets is likely to grow to 0.0287, while Average Assets are likely to drop about 14.6 B. While some baby boomers are getting worried about insurance space, it is reasonable to recap Assured Guaranty as an investment alternative. We will check if the company can maintain a respectable level of debt while minimizing operating losses.

Published over three weeks ago

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Reviewed by Vlad Skutelnik

Assured Guaranty has 1.67 B in debt with debt to equity (D/E) ratio of 0.33, which is OK given its current industry classification. The entity has a current ratio of 0.79, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Debt can assist Assured Guaranty until it has trouble settling it off, either with new capital or with free cash flow. So, Assured Guaranty'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 Assured Guaranty sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Assured to invest in growth at high rates of return. When we think about Assured Guaranty's use of debt, we should always consider it together with cash and equity.

Continue to hold Assured (USA Stocks:AGO) based on its current debt obligations?

Assured Guaranty financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Assured Guaranty, including all of Assured Guaranty's 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 Assured Guaranty assets, the company is considered highly leveraged. Understanding the composition and structure of overall Assured Guaranty debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it.

Please read more on our technical analysis page.

How important is Assured Guaranty's Liquidity

Assured Guaranty financial leverage refers to using borrowed capital as a funding source to finance Assured Guaranty ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Assured Guaranty financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Assured Guaranty's total debt and its cash.

How does Assured utilize its cash?

To perform a cash flow analysis of Assured Guaranty, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash Assured Guaranty is receiving and how much cash it distributes out in a given period. The Assured Guaranty cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

Assured Guaranty Net Cash Flow from Operations is very stable at the moment as compared to the past year. Assured Guaranty reported last year Net Cash Flow from Operations of (2.48 Billion)

Assured Guaranty exotic insider transaction detected

Legal trades by Assured Guaranty insiders are very common, as founders, directors, or employees of any publicly traded firm often have stock or stock options. These trades are made public in the United States through the filing of Form 4 of the Securities and Exchange Commission. Below entry was recorded recently and is publicly available as an insider trade:

Assured insider trading alert for general transaction of common shares by David Buzen, Head of Asset Management*, on 9th of August 2022. This event was filed by Assured Guaranty Ltd with SEC on 2022-08-09. Statement of changes in beneficial ownership - SEC Form 4 [view details]

Note, although insider trading is legal, in the United States, Canada, Australia, and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors, and any beneficial owners of more than 10% of a class of the company's equity securities.

What is driving Assured Guaranty Investor Appetite?

The firm reported the last year's revenue of 698 M. Total Income to common stockholders was 419 M with profit before taxes, overhead, and interest of 950 M.

Asset Breakdown

	Total Assets	15.07 Billion
	Goodwill	195.37 Million
	Tax Assets	451.13 Million

Assured Guaranty will most likely finish below USD64 in 60 days

Recent Total Risk Alpha is up to 0.08. Price may decline again. Assured Guaranty has relatively low volatility with skewness of -0.33 and kurtosis of 0.36. However, we advise all investors to independently investigate Assured Guaranty to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Assured Guaranty's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Assured Guaranty's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Our Final Take On Assured Guaranty

Although some other entities in the insurance—specialty industry are either recovering or due for a correction, Assured may not be as strong as the others in terms of longer-term growth potentials. While some insiders may not share our view, we believe it may be a good time to increase your existing holdings in Assured. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Assured Guaranty.

Editorial Staff

Gabriel Shpitalnik is a Member of Macroaxis Editorial Board. Gabriel is a young entrepreneur and writes predominantly on the business, technology, and finance sector. He likes to analyze different equity instruments across a wide range of industries focusing primarily on consumer products and evolving technologies. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Gabriel Shpitalnik do not own shares of Assured Guaranty. Please refer to our Terms of Use for any information regarding our disclosure principles.

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